From handshake to courtroom: The dangers of verbal agreements
NAMATIRAI RUZVIDZO
Mhofu had always been a shred businessman. He built his hardware from scratch in Mutare, turning it into one of the most formidable enterprises in the industry.
During the Christmas break, while enjoying a cold beer and grilled meat with his long-time friend Shumba at Chinyika Bar, their conversation shifted to a potentially lucrative building material supply deal.
After all Shumba was the owner of the biggest construction company in Mashonaland East. In the face of this potential lucrative partnership, Mhofu did not think twice about sealing the deal with a handshake- after all, what could go wrong between old friends?
The two men verbally agreed that Mhofu would supply Shumba’s company with hard-burn bricks, pavers and cement in large quantities worth almost US$50 000. Mhofu assured Shumba that the goods would be delivered within a week and Shumba promised to pay upon delivery.
But days turned into weeks and the weeks turned into months, Mhofu began to realize that something was amiss.
Shumba began avoiding his calls, and his emails went unanswered.
Then a letter arrived from Shumba’s lawyers, stating that they had never agreed to the specifications of the materials he delivered to Shumba’s company, that Mhofu realized the true extent of his mistake.
The bricks were reportedly ‘below the expected standard’, the pavers were of the ‘wrong make and colour’ and the cement was not from a ‘reputable manufacturer’.
Mhofu was asked to collect his building materials notwithstanding the cost which had gone into procuring them and the deterioration of quality over the months.
The verbal agreement had been worthless, and Mhofu was left with a massive financial loss.
He had borrowed funds to supply Shumba’s order and his company was on the brink of bankruptcy. He was left to pick up the pieces of his shattered business and was contemplating a massive lawsuit against Shumba. What exactly went wrong with this potential lucrative deal? Read on to find out.
What is a verbal agreement?
A verbal agreement, is an agreement between two or more parties made through the medium of vocal communication. Verbal contracts are sometimes nicknamed “handshake deals” because there is no written contract, and the deal is made through an informal spoken agreement. Verbal contracts are not recorded or written on any document.
Can a verbal agreement meet the essential elements of a contract?
A verbal agreement can meet the essential elements of a contract, but it can be more challenging to prove and enforce than a written contract. Indeed, a verbal offer can be made, and it can be accepted verbally. Verbal agreements can also involve consideration and the parties can have the capacity to enter into a contract, regardless of whether it’s verbal or written. However, verbal agreements can be more challenging to enforce than written contracts as there is no written record of the agreement. The terms of the agreement can be disputed as there is no clear written record of what was agreed upon. Verbal agreements can be more susceptible to misunderstandings and miscommunications.
Why is a verbal agreement risky?
- Lack of clarity
Verbal agreements often lack clarity and specificity, making it difficult to determine the terms of the agreement.
- Misunderstandings
Verbal agreements can lead to misunderstandings and miscommunications, which can escalate into full-blown disputes.
- No paper trail
Verbal agreements often leave no paper trail, making it difficult to prove the existence of an agreement or its terms.
- Difficulty in enforcement
Verbal agreements can be difficult to enforce, as they often rely on the goodwill and trust of the parties involved.
What are the consequences of verbal agreement gone wrong?
When verbal agreements go wrong, the consequences can be severe. Some common consequences include:
- Enforceability
Verbal agreements can be difficult to enforce, as they often rely on the memories of the parties involved. Without a written record, it can be challenging to prove the existence of an agreement or its terms.
- Costly disputes
Verbal agreements can lead to costly disputes, which can drain resources and damage relationships.
- Damaged relationships
Verbal agreements can damage relationships, as parties may feel betrayed or misled. In the case of Mhofu and Shumba, their friendship has obviously been scarred for life.
- Financial losses
Verbal agreements can result in financial losses, as parties may not receive the goods or services they expected.
- Disputes
Verbal agreements can lead to disputes, as the parties may have different recollections of the agreement. This can result in costly litigation and damage to relationships.
- Lack of clarity
Verbal agreements often lack clarity, which can lead to misunderstandings and miscommunications. This can result in unintended consequences, such as unintended obligations or liabilities.
- Breach of contract
If a verbal agreement is breached, the injured party may be able to sue for damages. However, proving the existence and terms of the agreement can be challenging.
- Remedies
The remedies available for breach of a verbal agreement may be limited compared to those available for breach of a written contract. For example, the court may not be able to order specific performance of the agreement.
- Evidence
In the event of a dispute, the parties may need to rely on evidence such as witness statements, emails, and text messages to prove the existence and terms of the agreement.
What are the best practices for avoiding the dangers of verbal agreements?
To avoid the dangers of verbal agreements, it is essential to follow best practices, including:
- Put everything in writing
Always put agreements in writing, including the terms, conditions, and scope of work and any other clauses which the parties to a contract may deem necessary for protection.
- Be specific
Parties to a contract should always be specific and clear to avoid ambiguity and vagueness.
- Establish a paper trail
Establish a paper trail, including emails, contracts and invoices, to prove the existence of an agreement and its terms.
Conclusion
Verbal agreements may seem like a convenient and efficient way to seal a deal, but they can be a recipe for disaster. By understanding the risks and consequences of verbal agreements, businesses can take steps to avoid the dangers and protect themselves. By putting agreements in writing, being specific, establishing a paper trail, and seeking legal advice, businesses can ensure that their agreements are clear, enforceable, and protected.
Namatirai Ruzvidzo is a registered Legal Practitioner, Conveyancer and Notary Public with the law firm, Ruzvidzo Legal Counsel. She can be reached on +263 784 228 534 or email namaruzvidzo@gmail.com, copying hello@rlcounsel.co.zw
