What Every Business Owner Must Understand About Verbal Contracts

By definition, a contract is any verbal or written agreement that creates legally enforceable obligations between two or more parties. Although Florida law treats verbal contracts as legally binding (except under certain circumstances), the risks may outweigh the benefits when it comes to business agreements, as the terms can be difficult to prove.

To create any contract, verbal or written, three elements must be present:

  1. A clear and unambiguous offer, such as “Party A will buy 25 units from Party B for $25 each”. “Party A needs around 25 units” is not sufficient.
  2. A firm acceptance of the offer. “Party B will see what it can do” is not a legal acceptance.
  3. Consideration, or a mutual exchange. Party A gives up money for the purchase and Party B gives up the units.

If even one of these factors is absent, there is essentially no binding agreement.

In Florida, certain types of contracts must be in writing in order to be enforceable. They include but are not limited to:

  • Real estate agreements involving land transfers, including easements and mortgages;
  • Contracts for purchases of $500 or more;
  • Contracts that cannot be completed within a year (except for indefinite duration contracts);
  • Prenuptial agreements and marriage contracts;
  • Contracts in which the executor of an estate agrees to personally pay for its debts;
  • Agreements whereby one person guarantees the debts of another.

While verbal agreements can be sufficient for informal, person-to-person arrangements, written contracts are nearly always preferable in business transactions. A signed document will:

  • ensure that everyone involved understands their obligations and rights;
  • lower the risk of disputes about the terms and conditions of the contract.

If problems arise and a business owner seeks court enforcement of a verbal contract, they must be able to prove that an offer was made and an agreement reached. If there was a credible witness to the contract, the plaintiff may prevail. A judge may also rule in their favor if the defendant claims they never agreed to $25 a unit but previous orders show that this is exactly what they paid in the past. But why assume the risk? A written contract can save the time, expense, and aggravation of future litigation.

Consulting a Florida contract lawyer with years of experience can help ensure that a business contract is completely enforceable. Call the Trembly Law Firm at (305) 431-5678 today to schedule a consultation.