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Written versus Verbal Contracts

Posted by wjadmin — filed in Contract Law

 

by Courtney Aarbo Barristers and Solicitors

 

Subject to the terms of the Statute of Frauds which is outline below, both written and verbal agreements are valid and enforceable.

 

The difficulty with a verbal agreement is that the terms of it may be very difficult to determine, as opposed to a written agreement.  It is therefore always preferable to put an agreement in writing.

 

An agreement may be partially in writing, and partially verbal.  There is great difficulty in this type of agreement however, in that the “Parol Evidence Rule” states that evidence of a verbal term that contradicts a written term of an agreement should be rejected.

 

Most written commercial agreements contain a term stating that the written agreement contains the whole of the agreement between the parties, and there have been no verbal representations.  Obviously arguing for a verbal term in the face of such a provision is a difficult proposition.

 

If one bought  a photocopier and there was a written term of the agreement that the Vendor would supply one box of photocopier paper, but the salesman promises two boxes, this promise would probably not be enforceable as the verbal two box promise contradicted the one box written provision.  In addition the written contract probably has a term that it contains the entire agreement, thereby further frustrating the buyer’s argument that he or she was verbally promised two boxes.

 

The lesson to be learned is that while a verbal agreement may be enforceable, the far better practice is to prepare a written record of the agreement.  Make sure that all terms of the agreement are accurately written into the document.  Never rely on a verbal promise that is not incorporated into the written agreement.  If the written agreement contains a term that it is the entire agreement with no verbal representations (which is a good practice to include), make doubly sure everything is included.

 

In the event that you have entered into a verbal agreement, you should prepare a letter/memo setting out in detail all the terms that were agreed to, and place it on your file.  It is also a good practice to forward a copy of the letter/memo to the other contracting party “confirming” what was agreed.  If the other contracting party does not contact you contradicting your letter/memo, it is likely that a Court will place great reliance on it as accurately embodying the deal.

 

Sometimes your written contract will be formed by a series of letters, faxes and or emails.  In other words the contract is not incorporated into a nice 2 or 3 document. Make certain  that the pieces of paper that form your “less formal” agreement are all put together and kept in a secure location.

The Statute of Frauds enacted in 1677 is still in force in Alberta and it sets out which contract MUST be in writing. Traditionally, the Statute of Frauds requires a signed writing in the following circumstances:

  • Contracts in consideration of marriage. This provision covers prenuptial agreements.
  • Contracts that cannot be performed within one year. However, contracts of indefinite duration do not fall under the statute of frauds regardless of how long the performance actually takes.
  • Contracts for the transfer of an interest in land. This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement.
  • Contracts by the executor of a will to pay a debt of the estate with his own money.
  • Contracts for the sale of goods involving a purchase price of $50 or more in Alberta.
  • Contracts in which one party becomes a surety (acts as guarantor) for another party’s debt or other obligation.

 For more information contact Courtney Aarbo Barristers and Solicitors at www.aflawyers.caor info@aflawyers.ca or phone 403 571-5120. .

 
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