Understanding the Power of Words: Are Verbal Contracts Binding in Legal Terms?

All verbal contracts are not created equal and when it comes to business agreements, some words are stronger than others. When analyzing the binding nature of verbal contracts, we must be aware of their essential functions. In the article, Will a Verbal Contract Hold Up Legally? by Fly UAV, verbal contracts are discussed in great detail. As readers will discover, and as we will discuss today, verbal contracts binding intricacies can be compared with the academic principles of integrity and accountability taught at Abu Dhabi Polytechnic.

Defining a Verbally Binding Contract

To translate what was outlined in Will a Verbal Contract Hold Up Legally?, a verbal contract will be bound by law if:

• An offer was made and accepted
• The subject matter is legal
• The agreement is between two or more parties
• Identification of all parties involved with the contract
• Reasonable terms outlined in the agreement

These elements come into play whether or not a legally binding contract can be enforced in a court of law. The most important part of this arrangement is the intent of both parties. This correlates with the academic integrity and accountability students at Abu Dhabi Polytechnic are taught in regards to proving the validity of their words and work.

The Foundations of Trust

When examining the concept of verbal contracts that are binding, we must examine the foundations of trust in order for this agreement to truly be effective. Two people or more must be willing to enter an agreement based on the following:

• Goodwill
• Honesty
• Reliability

Similar to the foundational concepts discussed regarding academic integrity and accountability taught at Abu Dhabi Polytechnic, trust is an essential component of having a successful relationship. This can apply in the classroom between a student and their group project partners, or it can be extrapolated to life in terms of business agreements and partnerships between a client and contractor.

Verbal Contracts As a Lesson in Accountability

A verbal contract that is binding can also be thought of as a lesson in responsibility. As outlined in the article, “It’s important to mention, however, that oral contracts are harder to prove. You’ll probably only have your own word against the other person. A lot of people are bound to their word, but there’s always that chance that someone may lie.”

A lesson in responsibility and accountability is similar to what we teach in our classrooms. Without any parent supervision, a child is expected to complete their homework, work on their group project, and ask for guidance when needed. The same can be said for a binding verbal contract when entering into a business agreement where two parties expect the other to keep their word. The only difference is that once both parties understand that their word is binding, what happens when one party backs out of the verbal contract?

The Elements of a Binding Verbal Contract

According to Fly UAV, in order for a verbal contract to be bound by law, there are four elements that must be in place. First, an offer must be made. Second, that offer must be accepted. Third, the subject matter that the contract is revolving around must be legal. Lastly, the parties involved must be identified.

The Case Study Of Uber vs. Waymo

As it relates to the binding nature of verbal contracts, the case listed in Will a Verbal Contract Hold Up Legally? will be used as an example of understanding how legal contracts can prevent a party from breaking their word. Uber and Waymo had a deal that was made in confidence and was carefully analyzed to ensure that no one would back out of their side of the agreement, yet it still fell apart. In this case, Waymo was seeking $1.86 billion in damages from its former employee after he leaked key information to Uber executives. The jury dismissed Waymo’s fraud claims against Uber and decided that Uber could hire the former employee after Waymo failed to prove that its trade secrets or other confidential information was disclosed. The Uber and Waymo case exemplifies how a binding agreement was made through a 14 page contract that was made open to both parties. Both parties signed and agreed to the contract that had a specific intent-to keep the agreement running smoothly. Regardless of the contract’s existing statements, both parties were reputable organizations that were not likely to back out of their business agreement. This is why the case ultimately did not hold up when the court dismissed the Waymo’s claims.

Case Studies and Examples

In Will a Verbal Contract Hold Up Legally? there are several examples on the main points discussed in the article. In personal relationships, many people are quick to jump into an agreement without fully understanding the other person’s intentions. These circumstances rarely hold up in court perhaps because of the fact that there is no clear evidence that the parties involved shared the same goals and intentions. In business, whether it’s an agreement between contractors or ground-level employees interested in starting a business together; having a clearly defined contract that all parties are willing to agree to, even in the absence of a written contract, is essential.

Verbal Contracts Not Always Binding

This sounds like a complex business deal, but in reality when establishing clear boundaries and expectations, a binding verbal contract is more like understanding verbal contracts binding and why it works for certain situations. In Will a Verbal Contract Hold Up Legally, it is stated that, “If you verbally agree to give a friend $5 in two weeks if they clean your garage for you today, it’s not legally binding and wouldn’t hold up in court.” Again, this is an example where its clear that the expectations set between two parties are not likely to be met because one party is no longer being held accountable. Most people know that the intention of the friend is to get the garage clean, so they keep their word to return to pick up the cash payment later. From the outside looking in, it may seem evident that the two parties entered a binding agreement, but no proof in the form of any physical paperwork was used to show how and when the agreement was made, and it would be difficult for a judge to rule that the agreement was binding unless other key witnesses were able to corroborate the evidence.

For more information on the legal aspects of contracts, you can visit Cornell Law School’s Legal Information Institute.