Can a verbal agreement create a legally binding contract?
Under English law a contract can be made verbally or in writing. However, verbal contracts are difficult to enforce because there’s no clear record.
There are contracts that must be in writing in order for them to be valid and those are as follows:
- insurance contracts
- intellectual property contracts
- contracts relating to the sale of land and property
However it is important to have a contract in writing — even if you don’t have to, in law and this is because:
- It is a lot easier to prove the existence of a written contract
- Written contracts disclose the expectations of both parties
- Remedies are set out clearly in the event that terms are breached
So what are these elements?
- intention to create legal relations
- privity of contract
What do we mean by Intention to Create Legal Relations?
The law makes it clear that there must be an intention to create legal relations and it makes a distinction between social and domestic agreement. Generally when parties enter into a commercial contract there is a presumption that the parties have the requisite intention to create legal relations.
However when it comes to certain family arrangements the courts could construe them as being ‘just part of ordinary family life’, see: Jones V Padavattan (1969) unless they are in writing see: Merritt V Merritt (1970). The same also applies with regards to social arrangements.
Contract Implied by Conduct
What happens if there is no contract is in place but goods have been delivered to the seller and the buyer has paid for those goods. So what happens?
Generally if there is no evidence of prior course of dealings, then a contract could be implied by conduct. For example the seller supplied the products and the buyer paid for those products. However under English law you still need to satisfy the elements of a contract as mentioned above. The issue here would be certainty regarding price? As far as English law is concerned the price would also need to be implied which would be ‘reasonable’.
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