People often wonder whether verbal contracts hold much, if any, weight. If you’re such a person, then you may be interested in a recent decision in the NSW Supreme Court.

The recent decision of the NSW Supreme Court in Yulema Pty Ltd & Anor v Simmons & Anor [2015] NSWSC 640 is a reminder that spoken words can be worth just as much as their written counterparts.

Notwithstanding this, the road to proving what was said, implied or intended is one which is much more difficult to travel.

In Yulema, Justice Slattery of the NSW Supreme Court upheld the contractual obligations imposed by a verbal agreement made in October 2009, despite circumstances where one of the parties to the contract and one of the people involved in its negotiation were unable to give evidence because they had passed away. The outcome of the decision was that the defendant owed the plaintiff approximately $350,000 plus interest on that amount from May 2011.

Lessons for business

• Verbal agreements can be just as enforceable as written agreements.
• Where possible, avoid making verbal agreements or representations in business discussions and ensure that your employees and agents are aware of this.
• Best practice is to ensure that your agreement is in writing. For example, if your contract is of special importance, involves a large sum of money, or if there is a possibility of a dispute in the future, it is advisable to have a written agreement to rely on.
• If you do make a verbal agreement:

1. give as much clarity to the terms as possible in order to avoid uncertainty;
2. take file notes of the conversation; and
3. ensure that there are suitable witnesses to the making of the verbal agreement.

• Do not rely on the passage of time to water down verbal contractual obligations.
• Note that some contracts are legally required to be in writing, including contracts for the sale of land, credit contracts and consumer leases, contracts for the performance of domestic building work, contracts for the sale of second hand motor vehicles and unsolicited consumer agreements.

If you’d like to learn more about the details of the case, you can read the article in full here

This publication does not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances.

Lloyd Priddle

Lloyd has had a very successful career as an accountant, director and author for almost 40 years. Holding post-graduate qualifications in Business, Lloyd has specialised in Business Development, and worked with the Queensland Government and local councils on numerous occasions through association with AusIndustry and the SBAS Natural Disaster Assistance Program. He is also board member of a number of commercial and not-for-profit entities.