Twitter Logo Youtube Circle Icon LinkedIn Icon

Publishing firms

Legal Developments worldwide

Legal Consultants in Dubai: Discussing Legality of Verbal Contracts

April 2019 - Litigation & Dispute Resolution. Legal Developments by Al Rowaad Advocates & Legal Consultants.

More articles by this firm.

A verbal contract is valued as much as the paper it is written on. While discussing and preparing for an important case, I found myself thinking the legalities of verbal contracts and the misconception towards their unenforceability.

Technically, in this part and other parts of the world, verbal contracts are binding and enforceable. As any contract requires an offer, acceptance and consideration and does not necessarily requires a piece of paper on which the arrangement shall be detailed out. This article will focus on how UAE laws interpret verbal contracts and how they are binding on the parties.

What are Verbal Contracts?

Often, verbal contracts are referred to as oral arrangements meaning unwritten contracts. Although such contracts are equally valid as that of written contracts, one may face complications proving the veracity of such contract and a considerable breach by the opposite party. Some outlining facts about verbal contracts are as follows:

  • a. When two parties portray their intentions and put it forward in oral communication, it becomes legally binding.
  • If someone agrees to offer you service for some amount of consideration upon your acceptance, you are legally bound to pay post receiving the service.
  • Any witness present at the time of verbal contract can be involved if there is a dispute pertaining to the breach of contractual obligations.
  • A verbal contract to commit an illegal activity is not binding and enforceable.

Enforceability

One of the key complications of verbal arrangement is its enforceability. The courts though will be able to draw the fundamental provisions of the contract in order to enforce it, yet it may be difficult if the case is about he said that and she said that. Parties may disagree with the content of the contract, and thus, it is easier to evaluate the true intention of the parties if the agreement is written, as simple as that.

In UAE Law, prima facie, verbal contracts are binding and enforceable, and the magnitude of enforceability relies on the intention and actions of the parties which assist in determining the veracity of the contract. The law states that any action or reaction which shows that there existed a mutual consent to do a particular act demonstrate their intention to contract.

History of the transaction between parties plays a crucial role in determining their intent and is strong evidence to evaluate the terms of an existing verbal contract. In the absence of the foregoing, rules of UAE customs apply which is otherwise not present in Commercial or Civil code. Importantly, the Civil Code of UAE focuses on the duty of good faith and bona fide intentions, which as a results helps on examining the conduct of parties.

In the event of dissension between the parties in accordance with a verbal contract, the court will decide the case on merits, nature of the transactions and relevant provisions of the Civil Law. The law explicitly highlights that a contract should include an agreement on all the terms and not on some of them. The court shall most certainly determine the extent of the performance of the contract and if or not there is any consideration paid by either party. The Commercial Law of UAE stipulates numerous provisions in relation to contractual obligations of parties which shall be taken into consideration if the contract is silent on such issues or there is no express agreement on the concerned matter.

Leave no space for Dubiety!

Albeit, UAE Law consider and enforce verbal contracts, it is usually prudent to draft the contractual terms in writing to avoid unnecessary conflicts and disputes. A written agreement makes life easier for the parties and for the court to make justice to the victim.