The curse of the Verbal Agreement.

The curse of the Verbal Agreement.

So what’s the problem with verbal contracts, it seems sensible on the surface, why can’t people just get on with doing business based on a rational conversation?

The problem with verbal agreements as per the famous quote by Sam Goldwyn (film boss from 1930’s)” is that they are not worth the paper they are written on”.

Of course it’s legal in certain circumstances, (depending on the type of law) also a budget to argue the issue will help, without money to contest the issue in court, how else can you prove the contract exists?

As demonstrated by the England bid to host the world cup in 2018, verbal contracts when they go wrong, generally lead to post event denial, bad feeling and an overall shambolic situation.   Listening to the commentary you would think the parties were describing two different situations rather than the same event.

Verbal agreements represent an unnecessary business risk and create ambiguity from the beginning of the client or supplier meeting.  Clear communication with clients is a difficult thing to achieve at the best of times, so omitting a written contract and relying on what everyone remembers to be the truth appears ludicrous.

The physiology of a verbal contract seems to suggest a keenness to be flexibility as a service provider or accommodating as a client.   An immediate willingness to trust without knowledge of the people involved or the full extent of the circumstances is an interesting way of exposing your business to uncertainty and all to avoid some paperwork or explore the client or supplier’s service offering or business intentions.   This isn’t to say doing business with friends is a walk in the park, sometimes familiarity can lead to you being last to be paid or expected to deliver a lot more because of the friendship.   So, arguably formality tests the strength of commitment.   Trust is a very important part of business and perhaps should be earned over time.

It only takes two minutes to type “problem with verbal contracts” into Google to find out how problematic it is to embark on a non-written agreement.  Perhaps a written contract is our way as humans, to get to know each other under the banner of legal protection, so post contract we can demonstrate those charming traits of over delivery and flexible customer service.  Impressing a company under contract is more likely to lead to both parties being satisfied rather than one disgruntled party.

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