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March 11, 2019
Technically, verbal contracts are binding and enforceable, since a contract requires an offer, acceptance and consideration and does not necessarily require a piece of paper on which the arrangement is detailed. This article will focus on how UAE laws interpret verbal contracts and how they are binding on the parties.
What are Verbal Contracts?
Verbal contracts generally referred to as oral arrangements, mean unwritten contracts. Although such contracts are equally valid as that written contracts, one may face complications proving the veracity of such contract on the breach of the contract by the opposite party. Some outlining facts about verbal contracts are as follows:
When two parties portray their intentions and put them forward in oral communication, it becomes legally binding.
If someone agrees to offer you service for consideration upon your acceptance, you are legally bound to pay post receiving the service.
Any witness present at the time of the verbal contract can be involved if there is a dispute regarding the breach of contractual obligations.
A verbal contract to commit an illegal activity is not binding and enforceable.
One of the key complications of verbal arrangements is their enforceability. The courts may be able to gather the fundamental provisions of the contract to enforce it, but that may prove difficult if the case is based on differences regarding what the parties agreed to. Parties may disagree on the content of the contract, and thus, it is easier to evaluate the true intention of the parties if the agreement is written.
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 mutual consent to do a particular act demonstrates their intention to contract.
The history of the transaction between parties also plays a crucial role in determining their intent and can help in evaluating the terms of the verbal contract. Importantly, the Civil Code of UAE focuses on the duty of good faith and bona fide intention, which helps in examining the conduct of the parties.
In the event of dissent between the parties regarding the terms of a verbal contract, the court will decide the case on merits, the nature of the transactions and the relevant provisions of the Civil Law. The law explicitly states that a contract should include an agreement on all terms and not on some of them. The court shall most certainly determine the extent of the performance of the contract and whether any consideration is paid by either party. The Commercial Law of UAE stipulates numerous provisions concerning the contractual obligations of parties which shall be taken into consideration if the contract is silent on such issues or if there is no express agreement regarding them.
Leave No Space for Dubiety!
While the UAE laws consider and enforce verbal contracts, it is preferable to draft the contractual terms in writing to avoid unnecessary conflicts and disputes. A written agreement makes life easier for the parties and the courts, in case of disputes between the parties.