Verbal Agreements in Business - Are They Legally Binding?

Transcript Excerpt: Verbal Agreements in Business - Are They Legally Binding?

(From a video by Jane Muir, Business Lawyer)

As a business lawyer, I do not recommend people get into verbal agreements. Hi, I'm Jane Muir and I'm a business lawyer located in Miami.

The problem with a verbal agreement is sometimes the parties don't have a meeting of the minds. That means you really need to understand clearly what are the price terms, the duration, and the thing that you're paying for in a contract. Without a clear understanding from both sides what the agreement is going to contain, it's difficult and potentially impossible to enforce an agreement. That's why it's really important to write down the terms of the agreement.

Now sometimes handshake agreements can work and they tend to work between family members or dear friends for years. And they work because there's a trust and confidence between two parties. However, I tend to see the ones that didn't work, and the reason they didn't work was because those parties just didn't understand each other clearly. So if you want to get into a business transaction with anyone, I highly recommend that you at least write down the key terms and consult with an attorney.

Recently, I spoke with a client who had entered a construction agreement with a vendor that was fixing their roof and their bathroom. The bathroom they did a terrible job on and the roof they did a good job on, but without an agreement they were forced to rely on the statute that applies to construction in Florida. And that statute is kind of favorable to contractors because it basically entitles a contractor to lean the house that they do work on until you can prove that they did something incorrectly. If she had a contract, it would have been better because it would have been clear what the services were expected to be from the contractor. So that's one example of a situation where a verbal agreement really was unfavorable to the person who wanted to enforce their rights.

Another situation I had recently having to do with a verbal contract modification was a purchase of a home. And the purchaser put a deposit in that they agreed to release on the condition that they would get an extension. But since that was not in writing as a formal addendum to the original purchase agreement, once they released the deposit, the realtor was able to sell the property to another buyer. So, if you want to make any agreement or alteration to any agreement, I highly recommend that you consult an attorney and get it in writing.

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Need help reviewing or drafting your contract? Contact J. Muir & Associates, a Miami Business Law Firm, to protect your business today.