But there’s nothing in writing……

How often do you hear that? It’s as though there’s some rule that unless a contract is in writing it’s not binding.

Verbal contracts can indeed be enforceable.  In fact, unless specifically required by statute to be in writing, contracts can be in any particular form – verbal or written– so long as the legal elements for formation of a contract have been fulfilled. 

Contracts relating to the sale of land, consumer credit, sale of motor vehicles, residential tenancy, copyright or construction must be in writing and signed. Depending on the contract, the consequences of failing to do so can vary from fines to non-enforceability of the contract.

However, all significant commercial agreements such as those relating to employment, business, property, finance or other real estate dealings need to be recorded in formal written documents.  There are sound practical (as well as legal) reasons for this, for example:

·        during the contract preparation and signing process, people are more likely to consider the entirely of what they are agreeing to, and think further through the deal – rather than just assuming that their assumptions about the deal are intuitively understood by the other party.  The process is also more likely to flush out areas of potential dispute before the parties are locked in;

·        proving that a verbal contract existed can be problematic and expensive, as litigation is often involved.  If the contract is recorded in writing, there is clear evidence of the contract’s existence and of its terms.  This itself can reduce the likelihood of a dispute arising;

·        it helps protect vulnerable parties, as the stronger party must clearly set out their terms of engagement.  Harsh terms are more likely to be noticed and understood by the other party if they are in writing;

·        contracts can also be drafted to contain clauses dealing with how disputes under the contract will be resolved, for example through mediation or arbitration. This can save time and money in the event that a dispute does arise. 

People’s attitude to contractual matters is a good indicator of their approach to business generally.  A diligent and business-like approach to contractual documentation is an essential element of good governance and business survival.