Is your word your bond? The enforceability of verbal agreements

• South Africa

• Commercial agreements

06-04-2022

One of the most searched legal questions is: are verbal agreements valid and binding? Verbal agreements are in fact valid, legally binding and enforceable, subject to a few exceptions.

The difficulty of a verbal agreement arises where there is a dispute between the parties and a breach of the agreement may need to be proven. One must prove that there is in fact a valid agreement in place, as well as the terms and conditions of that agreement. Memories are often unreliable and fade over time, this allows room for inaccuracies and inconsistencies between parties on what was agreed.

In order for a contract to be valid, the following essential elements need to be present:

1. the parties must have the capacity to contract;

2. there must be an offer and acceptance;

3. there must be consideration;

4. the contract must be possible; and

5. the contract must be lawful.

Some form of evidentiary proof is required to prove the existence of an agreement and the terms of a verbal agreement, especially when parties have a difference of opinion on the “Ts and Cs” and/or a claim of breach has been made. This proof may include:

1. recording of a conversation;

2. notes from a conversation;

3. witnesses;

4. a letter, email and/or text message which will assist one to ascertain the contractual relationship between the parties; and/or

5. proof of payment, quotes or transactional statements showing the offer and/or acceptance.

As always, there are exceptions to the rule. According to South African law, there are some contracts which need to be in writing to be valid, for example antenuptial contracts, contracts for the sale of immovable property and suretyship agreements.

While verbal agreements are for the most part valid, legally binding and enforceable, it is generally recommended for agreements to be recorded in writing. If you need further information on the above or assistance in drafting an agreement, we have a team of experts who will gladly assist.