1.3.2018

Oral agreement in court

An oral agreement binds its parties, such as a written agreement in accordance with the principle of binding nature of contracts (pacta sunt servanda). We are also talking about the freedom of form in making contracts.

The contract will be concluded with an acceptable response to the offer

An oral agreement can be considered to have entered into force when the parties agree either expressly or silently with the same content. Talk about the contract mechanism.

On the other hand, an oral offer must be answered immediately on the grounds that the offer is considered to be rejected.

Exceptionally, an oral offer does not have to be answered immediately if the bidder has extended the response time, for example by setting a deadline for the reply.

Certain agreements are valid only in writing

In certain situations, the contract must be drafted in accordance with the statutory provisions required by the law in order for the contract to be valid.

For example, the charter of a limited liability company and the sale of a real estate property must be made in a definite way, with the threat that the contract violating the formalities is void, that is, from the outset, an invalid contract that cannot be relied on in court.

Litigation in matter of oral agreement a toss up

In the absence of a written agreement and other written evidence, the outcome of the trial may be dependent on external factors. Thus, the outcome of the trial about an oral agreement may be difficult to foresee.

Drafting of a written contract, documentation of contract negotiations and retention of possible email and text messages are recommended to avoid disputes and proof difficulties in court.

Defending oneself against disagreements

In case of disagreement, the intent of the parties will be proved by available background material such as negotiation memos, protocols, e-mail and text messages.

On the other hand, if there is no background material (for example, in the case of possible shortcomings in a contract), you can refer to (mandatory) legislation, the established practice of the parties and the general commercial practice of the industry in concern.

Form reservations prevent disagreements

Between equal parties, the disagreement about an oral agreement is prevented by using certain form requirements in order to get binding agreement.

If the agreed form requirements have not been followed in the mutual contractual relationship, no valid agreement has been concluded between the parties and the contract cannot be invoked in the court.

On the other hand, the parties may agree to negotiate orally, but confirm the oral agreement in writing or agree that the written agreement includes everything agreed.

Omitting a written agreement or lack of a term in a written contract means that the parties have not intended orally agreed obligations or terms to be taken into the contract. This is to ensure that orally spoken matters lose their meaning in litigation. It is about contract risk management. This will ensure continuity of contractual relations and long-term cooperation.

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