Is a Verbal Contract Legally Binding?

Yes, verbal contracts—also known as oral agreements—can be legally binding in the UK, provided they meet certain criteria. However, relying on them can be risky due to challenges in proving their terms. This guide explains when verbal contracts hold weight in UK law and why using electronic signatures can offer greater security.​

What Constitutes a Verbal Contract?

A verbal contract is an agreement made through spoken words, rather than written documentation. For instance, if you agree over the phone to provide a service for a set fee, and the other party accepts, a verbal contract exists. While
legally binding, these agreements are often harder to enforce due to the absence of written evidence.​

Essential Elements of a Legally Binding Contract

For a verbal contract to be enforceable in the UK, it must include:​

1. Offer: One party proposes terms to another.
2. Acceptance: The other party agrees to those terms.
3. Consideration: Something of value is exchanged, such as money or services.
4. Intention to Create Legal Relations: Both parties intend for the agreement to be legally binding.
5. Certainty of Terms: The terms must be clear and unambiguous.​

If any of these elements are missing, the agreement may not be enforceable.

When Is a Verbal Contract Not Legally Binding?

Certain types of agreements must be in writing to be legally valid in the UK. These include:​

• Land Transactions: Selling or transferring property.
• Guarantees: One party agrees to be responsible for another’s debt.
• Consumer Credit Agreements: Loans or credit agreements regulated by the Consumer Credit Act.
• Employment Contracts: Particularly for employees with specific rights under employment law.​

In these cases, a verbal agreement is insufficient, and a written contract is required.​

Risks of Relying on Verbal Contracts

The primary disadvantage of verbal contracts is the difficulty in proving their terms if a dispute arises. Without written documentation, it becomes a matter of one party’s word against another’s. Evidence such as emails, text messages, or witness testimony can support the existence and terms of a verbal agreement, but these are not always conclusive.​

The Advantages of Electronic Signatures

To mitigate the risks associated with verbal contracts, consider using electronic signatures. Electronic signatures are legally valid in the UK under the Electronic Identification and Trust Services for Electronic Transactions Regulations 2016. They provide a secure, verifiable method of confirming agreement to contract terms, offering greater protection than verbal agreements alone.​

Conclusion

While verbal contracts can be legally binding in the UK, they are challenging to enforce due to the lack of tangible evidence. For important agreements, especially those involving significant sums or long-term commitments, it’s advisable to use written contracts and consider electronic signatures for added security and clarity.​