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Verbal Agreements - Are They Enforceable?
Prepared By Timothy C. Platnich

The content of this article is intended to be informational only. We caution you against using or relying upon any information contained in this article without first seeking legal advice regarding your particular matter. All matters arising from the use of our website, including this article, shall be governed by Alberta law and shall be within the exclusive jurisdiction of the courts of Alberta.

There is a perception that verbal agreements are not enforceable. Several people have said to me, "well, we never put anything in writing so I guess there is nothing I can do".

The general rule is that verbal agreements are enforceable. There are exceptions, the most notable of which relates to agreements concerning the transfer of an interest in land.

The biggest problem with verbal agreements (also know as oral agreements) is proving them. If one person says that an oral agreement was reached and the other party denies the agreement, it may be difficult to enforce the agreement.

To be legally enforceable an agreement (oral or otherwise) must meet certain conditions. It must contain essential contractual terms; the terms must be sufficiently certain to allow for enforcement and no essential terms may be left for future agreement.

What essential contractual terms are necessary will depend on the context of the agreement. For example, an agreement of purchase and sale will have the following essential terms: who is the seller; who is the buyer; what is being sold; what is the price; when and where will delivery take place. If, for example, price is uncertain - the agreement provides that "market value" will be paid, the agreement may be unenforceable due to uncertainty. Or, if the agreement provides that the price will be agreed to later, the agreement may be unenforceable as being an "agreement to agree".

In circumstances of oral agreements, there is often disagreement between the parties on: whether the parties actually intended to contract; whether the parties agreed on any or all of the essential terms; or what the essential terms of the contract were. In the case of conflicting evidence, the court must decide what evidence to accept. Once deciding which evidence to accept, the court must then go on to decide, based on the accepted evidence, whether an enforceable contract has been proven on a balance of probabilities. The person alleging the contract carries the onus of proving the contract. A balance of probabilities generally means that the court must be satisfied that it is more likely than not that a contact exists. If the probabilities are even, the party alleging the contract will lose.

In many cases involving an oral agreement there is documentary evidence in existence. The documentation may fall short of constituting a written agreement but may still substantiate the assertion that an agreement was reached. For example there may have been draft agreements that were prepared but unsigned. Furthermore, the parties may have acted in a way that supports the assertion that an agreement was reached. The court will consider all such evidence in determining which evidence to accept and in determining whether the evidence, as a whole, establishes an enforceable agreement.

The author has successfully represented Plaintiffs in trials based upon oral agreements.  Two examples are: Matthews vs. Accent Lines, affirmed on appeal by the Court of Appeal; and Holman vs. Calgary Properties, Inc., et al.  An article regarding the Holman case is also available on our website by clicking here.

 

This paper was prepared by Tim Platnich.

 


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