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A verbal contract may be binding, but there's still one huge risk

Generally speaking, a verbal contract does count. It is binding. You and another business owner have to abide by it as long as it is:

  • Equitable
  • Reasonable
  • Conscionable
  • Made in good faith

That being said, agreeing to a verbal contract and not getting it in writing does still puts you at risk. You have to understand that you're taking a serious chance; is that really what you want to do with your company?

The problem is that the other party may not be honest in court. You may feel outraged. You'll argue that he or she is lying. You'll demand that justice be done.

However, the court may have very little way to prove that the other person is lying. Without a written document, what evidence do you have? Is it just going to be your word against theirs? That person may even double down and claim that you're lying, and you can't prove that you're not.

A verbal contract usually sounds good when things are going well. The two of you are getting along, you consider yourselves friends and you don't want the hassle of writing out the documents. You may even feel bad to ask for a written contract because the implication seems to be that you don't trust the other person.

When things fall apart, though, you may come to regret that verbal deal. You had good intentions, but now you're in a tough spot without any recourse.

If you're thinking about signing a contract or offering one, think ahead. Consider your legal options and the potential outcomes. Make sure that you protect yourself and your company.

Source: The Law Dictionary, "Is A Verbal Agreement Legally Binding?," J. Herby, accessed Nov. 29, 2017

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