Why Most Commercial Lawyers Normally Recommend Written Agreements Over Oral Agreements

In the commercial world, businesses make agreements with individuals and other businesses every minute of every day, and if you ask the commercial lawyers from Culshaw Miller whether those agreements should be made orally or written, then the majority are highly likely to advise it should be the latter.

There are several reasons why commercial lawyers might prefer written agreements to oral ones, but to understand why, it is important to understand what the main differences are from a legal perspective, rather than simply the physical differences between them.

An Oral Agreement And Its Legal Standing

An oral agreement is one where both parties have agreed to a course of action or outcome verbally, however, a verbal agreement does not necessarily mean that a legal and binding contract has been entered into. For it to be the case that the verbal agreement forms a legally binding contract, three key elements must be in place.

  • Offer And Acceptance

The first element is that one party must have made a legitimate offer, and the other party must have clearly accepted that offer. In addition, what the offer includes and is agreed to must be clear concerning all its essential terms, with no omissions or anything yet to be negotiated incomplete.

  • Consideration

This term means that the agreement must relate to something which has value and is to be exchanged between two parties to an oral agreement. An obvious example is the payment of monies for a product or service.

  • An Intention Of The Parties To Enter A Legal Relationship

The third element means that both parties must have the intention to be bound legally by the terms specified in the oral agreement they have with each other. This is often evidenced by actions on one or other of the parties such as a payment or the commencement of product or services being rendered.

Enforcement Of Oral Agreements

One of the main reasons that commercial lawyers often advise their clients to seek written agreements rather than oral ones is that an oral agreement can be difficult to enforce. Lack of evidence of an oral agreement is one hurdle, especially if there are no witnesses to it or no recorded communications. In many cases, it is one party’s word against the other if a dispute arises and that can often lead to them being unenforceable.

Ironically, one way in which an oral agreement can be enforceable is if there is written evidence to prove that one exists. This can include emails or written correspondence including text messages concerning the oral agreement, especially if created after the agreement is made to confirm its existence.

Other documents such as purchase orders, invoices, payment receipts, delivery receipts, and bank statements showing the exchange of monies are also potential evidence to aid the enforcement of an oral agreement.

Why Commercial Lawyers Recommend Written Instead Of Oral Agreements

Whilst oral agreements in business might seem simpler, easier to create, and less complex, especially if you are not used to entering written agreements, they are not what most commercial lawyers will recommend. The difficulties in enforcing is a major concern, and the fact is, a written agreement will save you both time and money, as well as many hours of angst.

Written agreements provide clarity for all so that everyone concerned with the agreement knows exactly what has been agreed to and the terms upon which the agreement is based. Written agreements are also much easier to enforce should the other party to your agreement not meet their obligations to you, because you have their obligations in written form.

Finally, should there be any kind of dispute, the resolution of that dispute will be far smoother than under an oral agreement. A written agreement may have dispute resolution terms included such as mediation by a third party, such as an independent commercial lawyer.

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