What Are My Options if a verbal contract is breached by a person or a company?

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Financial constraints, technical problems, political and economic issues may hinder contracts already entered into. What happens when contracts are not performed as they should be? Or when they are breached? This article is here to explain what a contract is, what leads to a breach in contract and what options you have as someone whose contract has been breached.

Is there a Contract?

To gauge whether a contract has been breached, it is important to identify whether a contract exists or not. A contract is not necessarily a signed piece of stamped paper as we generally know it. A contract can be by way of written form and or verbal. Often businesses negotiate terms orally and do not create invoices for all transactions to be conducted beforehand. Hence, even verbal contracts can be enforced if you can prove that it was a contract. For any agreement to be considered a contract, it has to contain the following elements.

1. Offer and Acceptance

One party needs to make an offer and the other party needs to accept it. Any negotiations, counteroffers and or rejection of the offer do not count as acceptance. Therefore, unless there is a clear acceptance, the contract has not been enforced.

2. Consideration

Consideration is anything of value that is offered and accepted by both parties. Consideration doesn’t need to be a monetary exchange; it can be anything that holds value, such as an item.

3. Intention

The consideration agreement leads to all contracting parties agreeing to be bound by the contract. This refers to their intention of upholding the terms of the contract.

4. Capacity

Capacity refers to the ability to enter into a contract with someone. This refers to mental capacity, and contracts are void if they are conducted in a state of intoxication or mental incapacitation. Contracts with minors are also considered void.

5. Certainty

Certainty in a contract refers to the clarity provided by the terms and agreements in the contract. Contracts can be made void or breached if the conditions and deliverables are vague and not clearly defined.

Types of Breach

Once it is determined that the contract is enforceable, the next step is to identify if a breach exists and what type of breach exists. The compensation and legal remedies will be in line with the type of breach that has arisen.

Material

A material breach occurs when the main and fundamental reason of the contract does not take place. The core of the contract is the reason why the contract was signed in the first place. As such, the non-violating party gets no advantage of having signed the contract.

Minor

A minor breach, also known as a partial breach occurs when a term of the contract has been only been partially performed. Unlike a material breach, the non-performance of a clause has little impact on the outcome of the agreed project.

Anticipatory

An anticipatory breach is defined as one where a party feels that the other party may not be able to uphold their end of the contract or perform according to the agreed-upon terms of the contract.

Actual

An actual breach is when one party fails to fulfil their duties by the agreed-upon date and time.

Challenges of Non-Written Contracts

Contracts have 3 main types of terms – express, implied and verbal. Express terms are ones that are explicitly mentioned in the contract, e.g. the deliverables of the contract and the date by which they should be performed. Implied terms are the ones that are not written clearly in the contract but are taken as given. For example, at a grocery store, you would be paying for the goods before you leave; it doesn’t have to be stated.

Verbal terms are agreed upon orally, and there is no written record. Such contracts are harder to prove and contest in cases of breach unless there are witnesses. It is always recommended to have something in writing so that parties can be held accountable in cases of a breach. In the case where a contract  is verbal, it is best to have a witness who can testify to the agreed terms of the contract.

Remedies

In case you have had a breach of contract, there are multiple remedies that can be resorted to depending on the type of breach.

1.    Amend the Contract

Contracts are exclusive agreements between two parties. When a contract is signed, both parties expect to receive certain benefits in the form of outcomes to be achieved. In case any of the terms are not being met, both parties can look to altering the contract terms instead of terminating the contract. Amending the contract would ensure that the parties do not have to negotiate new contracts and will also fulfil expectations with slight changes to the terms of the contract.

2.    Terminate the Contract

In case of a material breach, the disadvantaged party may consider terminating the contract. However, the option to terminate depends on the contract signed, and the conditions of termination agreed upon when contracting. These terms could include giving a notice period before termination and formal written termination of the contract. It is also advisable that you reach out to a lawyer when considering termination to ensure that you do not violate any legal conditions.

3.    Sue for Damages

A breach allows the disadvantaged party to sue for damages in court. Damages seek to compensate the party for the losses caused by the breach. A major consideration here would be to assess the losses you will be recovering versus the cost of litigation when you go to court. Litigation is time-consuming, and can be very costly. There is also no guarantee of the damages you will receive, so it is always best to proceed with legal counsel in such circumstances.

4.    Negotiate and Settle

Litigation may be the first option that comes to mind when facing a breach of contract. However, as mentioned earlier, it is costly, time-consuming and requires many resources. Instead of jumping into a legal battle in court, you can opt for alternative dispute resolution techniques and negotiate with the other party. These negotiations can be undertaken with legal counsel present to help negotiate the best deal. You can choose to amend the contract, renegotiate or settle for damages with an out-of-court settlement.

Key Takeaways

  • Contracts can be in written or verbal form; all that is required for them to be enforceable is to have 3 key elements: offer and acceptance, consideration, and intention.
  • Contract terms can be verbal, but it may be difficult to hold parties responsible in the case of a breach. Hence, it is best to have the agreed in writing or have a witness present.
  • Remedies available for the party not in breach include – amending the contract, suing for damages, terminating the contract or settling it through negotiation.

Find An Expert Legal Counsel

Most contract breaches are usually settled between the parties by in-house counsel through negotiations and meetings. It is when these don’t bear fruit that companies decide to pursue legal action, which can have a detrimental impact on your business.

Have you had a breach of contract? Ensure you are legally protected and speak to a Lazarus Legal business lawyer who can negotiate your case and offer the best legal outcome. At Lazarus Legal, we have a competent and trusted team of legal advisors who care about your business just as much as you do. Get in touch and we will share with you what your legal options are and how to best move forward.

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Mark Lazarus

Mark Lazarus

Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.

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What Are My Options if a verbal contract is breached by a person or a company?