If you’re a business owner, then you know the importance of contacts. These agreements can set the stage for a wide variety of dealings, from securing supply chains to obtaining commercial leases and dictating employee relations. Sometimes, though, these agreements are not always commemorated in writing. In those circumstances, does a verbal promise constitute a legally enforceable contract?

It depends on the circumstances, but a number of factors must be considered before an answer can be given. To start, you have to assess whether an actual offer was made, meaning that some sort of bartered exchange was discussed. If there was, then a court will look to the reasonableness of the offer. If the offer had outlandish terms that a reasonable person would identify as a joke, then it’s probably not going to be found to be legally enforceable.

Another aspect that will be analyzed is the history of dealings amongst the parties. If they have had written contracts with similar terms, or they have operated based on each other’s words for a significant period of time, then it’s more likely that a court will deem a verbal promise to constitute an enforceable contract.

Detrimental reliance is another key consideration. If the offer was reasonable and another party, say, forwent another contract whose terms were favorable, then the harm caused by losing out on the favorable written contract can support a finding of detrimental reliance. Proving this aspect requires presenting evidence that demonstrates that some sort of financial harm was suffered.

Dealing with contract issues, including breach of contract can be challenging. Yet, the outcome can have very real consequences for your business’s bottom line and its reputation. Therefore, to ensure that you are protected as fully possible in these matters, consider consulting with an experienced law firm before taking any action on the issues confronting you.