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:
- 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
- A verbal contract to commit an illegal activity is not binding and enforceable.
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.