Let’s Shake On It: The Risks of Verbal Agreements
By Jiya Dassan, Family, Estate and Civil Litigation Lawyer, Vancouver
You have been doing business with the same construction company for years. You always provide high-quality work, and they’ve always paid you on time for your labour and supplies. Even without a written contract, things ran smoothly—until now.
Suddenly, they stop paying you. They claim the project took too many hours and refuse to cover the labour and supplies you provided. They’re not responding to your messages, and you’re left paying employees and covering supply costs out of pocket. This is not what you agreed to.
These kinds of agreements are still common in many industries across British Columbia. But when something goes wrong, people are often surprised to learn that their “handshake deal” can carry real legal consequences.
In this blog, we’ll break down what verbal contracts are, whether they’re legally binding, and some of the common challenges that arise when nothing is put in writing, so you can better understand what a handshake deal means for you.
What Are Verbal Contracts?
Verbal contracts, oral agreements, handshake deals – whatever you call them, they’re all referring to the same thing – a legally binding agreement made through spoken words rather than in a written document.
Often, the people involved talk through the terms of their agreement, such as the scope of the project, estimated total cost, and approximate timelines. Then, they shake hands. They don’t sign a piece of paper outlining the details of their business relationship. It is just the handshake that seals the deal, and you do not think about it again…until a problem arises.
Are Verbal Contracts Legally Binding?
Yes, verbal contracts are legally binding.
Just like written contracts, verbal contracts must contain the necessary elements of a valid contract. There needs to be:
- An offer and acceptance – An “offer” is a clear proposal made by Party A to Party B indicating a willingness to enter into a contract on specific terms. Acceptance occurs when Party B agrees to the exact terms of the offer.
- Consideration - This is an important part of every contract and refers to something of value that is exchanged between the parties. For example, Party A promises to complete a construction project, and Party B promises to pay for the work. Party A’s materials and labour are valuable forms of “consideration”.
- The intention to create legal relations – The parties intend their agreement to have legal effect. Both parties understand the agreement is not just a casual arrangement.
- The contract itself must be of a legal nature and the contract cannot involve illegal activities, crime, or violate public policy.
- The parties must have the capacity to enter into a contract – This means they must understand the agreement and be legally allowed to make it. A person may lack capacity due to age, mental illness, or another impairment that affects their ability to understand the nature and consequences of the contract.
In other words, a verbal contract can be just as legally binding as a written one. The challenge is rarely whether the contract exists, but whether its terms can be clearly shown if a dispute arises. Without something in writing, disagreements often come down to evidence, memory, and credibility, making these cases more complex than many people expect.
What Are Some Common Challenges With Verbal Contracts?
The biggest challenge with verbal contracts is proving them. With nothing in writing, the parties cannot refer to a document to confirm what was agreed to, which can quickly turn into a “he said, she said” situation.
If a verbal contract is challenged, the key question becomes: whose version of events will a judge believe? Much of that decision depends on the evidence each party can provide to support their understanding of the agreement.
For example, did you send emails or text messages discussing the scope of the project, the number of hours involved, or the supplies required?
Misunderstandings are another common issue. People remember conversations differently, and both sides may genuinely believe they agreed to something that was never clearly discussed. You may have assumed that an extended project deadline meant additional pay for you and your employees’ labour, while the other party may believe the price you discussed was fixed no matter how long the work took.
When the parties don’t agree on what was said or promised, a judge must weigh the available evidence—such as emails, text messages, or witness testimony—and decide which version of events is more credible. If you’re unsure what evidence may be relevant to your situation, getting advice from an experienced civil lawyer can help ensure you are protected.
These challenges are all good reasons why it’s important to get agreements in writing. A written contract provides clarity, specificity, and a shared understanding, and it is far easier to enforce when disputes arise.
When Should You Put a Contract in Writing?
Verbal agreements can create unnecessary risk and uncertainty for those involved, while written contracts protect both parties and make them easier to enforce.
There are some situations where a written contract is not legally required, but relying on a verbal agreement alone may still leave you exposed.
Having a written agreement is especially important in situations such as:
- Employment contracts – Define rights and responsibilities.
- Lending or borrowing money – Clarify repayment of loan.
- Buying or selling a car – Provides a written record of the transaction.
- Confidentiality agreements – Help ensure information remains private.
- Business partnerships – Explains how the partnership will operate and helps prevent disputes between parties.
What Cannot Be a Verbal Contract?
There are certain types of contracts that must always be in writing in British Columbia in order to be legally binding. These requirements exist to promote clarity, accountability, and legal protection.
These include:
These include:
- Real estate transactions - Any agreement for the purchase or sale of land must be in writing.
- Guarantees - Where one person agrees to take responsibility for another person’s debt if they are unable to pay it.
- Marriage-related agreements – Contracts related to marriage or cohabitation, such as prenuptial or postnuptial agreements.
- Wills - A will cannot be verbal. To be legally valid, it must be made in writing and properly executed in accordance with the law.
Ultimately, having clear terms protects everyone involved and helps prevent misunderstandings before they turn into disputes. A properly documented agreement outlines each party’s rights and responsibilities and provides a clearer path forward if something goes wrong. If you need help enforcing a verbal or written contract, a free 20minute consultation with Crossroads Law can help you understand your options. Reach out to us today to get started.
The information contained in this blog is not legal advice and should not be construed as legal advice on any subject. The information provided in this blog is for informational purposes only.
