The witticism “an oral contract is not worth the paper it is written on” is generally sound advice. Although purely oral contracts are valid, they are harder to prove in the event of a dispute.
It makes obvious and sound commercial sense to confirm a verbal contract in writing, whether made on the phone or by any other conversation, by means of an email or letter addressed to the customer setting out what had been agreed verbally. From an evidential viewpoint in the event of a dispute, it would be difficult for the customer to credibly deny what they had agreed to when given the opportunity to respond to a confirmation letter. In effect, many contracts formed in this way are partly verbal and partly in writing.
When a court has to determine the terms of an oral contract it is a question of fact. Establishing the facts would usually depend on the recollections of the parties and their witnesses. Generally, where each party disputes the accuracy of the other’s view, the court is able to consider evidence of what the parties had done and said after the agreement was made. In a wholly written contract such evidence would be inadmissible.
One of the key elements for an enforceable contract is certainty of terms along with offer, acceptance, consideration and an intention to create legal relations.
This concept of certainty of terms arises frequently in disputes.
Bear in mind when negotiating with customers to avoid making an enforceable contract accidentally, since it would then be difficult, for example, to establish that your standard terms of business have been incorporated into the agreement if reference to these had not taken place in the negotiations.
This is not a problem where the two parties had developed a course of dealing. In a recent case, Provimi France SAS v Stour Bay Co Ltd , the claimant was a manufacturer of poultry feed and had been purchasing vitamin supplements from the defendant supplier since 2009. It was alleged that the vitamin supplement quality had dropped, some six years later, in 2015. The manufacturer alleged that it was an express term of the contract that the supplement would meet its specification requirements and also relied on the implied terms of satisfactory quality and fitness for purpose in the Sale of Goods Act 1979. The supplier denied that the manufacturer’s specification formed part of the contractual terms on the basis that it had only been given to them after the first order had been agreed.
Importantly, the supplier asserted that its standard terms and conditions, which excluded the Act’s implied terms, had been incorporated into the contract, as they were routinely included on the back of its invoices and had therefore become part of the parties’ dealings with each other.
On the facts of this case, the court held that the requirement for the essential element of certainty of terms operated in the defendant’s favour, through a course of dealing, but interestingly not in the claimant’s favour.
If you have unpaid invoices, from either written or verbal contracts, then use the Debt-Claims portal today to start recovering the sums owed to you.
