Verbal Agreements in BC: Are They Legally Binding?

People make deals by phone, over coffee and by text every day. Most of those agreements can be just as binding in BC as a signed contract.

The trouble starts when the other side remembers the deal differently, or denies it. This article explains when a verbal agreement holds up, which agreements need writing, and how to protect yourself.

The general rule: writing is usually not required

A contract is formed when the parties agree on its essential terms and intend to be bound. For most kinds of agreement, the law does not care whether that happened on paper, in a conversation or through conduct.

BC's Sale of Goods Act says so directly for the sale of goods. Section 8(1) provides that a contract of sale may be made in writing, by word of mouth, partly in writing and partly by word of mouth, or may be implied from the conduct of the parties. The same general approach applies to many service arrangements, loans between people and informal business deals.

Whether an oral agreement is a contract still depends on the usual questions: were the key terms settled, did both sides mean to be bound, and was something exchanged? A loose promise, or a deal with the price or scope left open, may not be enforceable however sincere it was.

The hard part is proof

When a written contract exists, the dispute is usually about what it means. With a verbal deal, the dispute is often about whether there was a deal at all, and what its terms were. A court decides that on the evidence, and each side's memory of a conversation is only part of it.

Evidence that often helps:

• Messages before and after the conversation. Texts or emails that mention the price, the work, a deadline or a payment schedule.
• Payments. Deposits, e-transfers with a memo, invoices sent and paid.
• Conduct. Work started, goods delivered, keys handed over, or one side accepting the benefit of the arrangement.
• Witnesses and notes. Someone who was present, or notes made at the time.

If you are relying on a verbal deal right now, a short follow-up message setting out what you understood was agreed can be valuable later, especially if the other side replies without disagreeing.

Texts, emails and electronic signatures

BC's Electronic Transactions Act supports deals made electronically. Section 3 says information or a record covered by the Act must not be denied legal effect or enforceability solely because it is in electronic form. Section 15 allows an offer or acceptance to be expressed electronically, including by clicking an icon, and says a contract is not invalid or unenforceable solely because electronic records were used to form it.

Where a law requires writing, section 5 says an electronic record satisfies it if it is accessible in a way usable for later reference. Where a law requires a signature, section 11 says an electronic signature satisfies it, subject to a regulation-making exception. The Act defines an electronic signature as information in electronic form that a person has created or adopted to sign a record.

Section 2(4) lists exclusions. The Act does not apply to wills, trusts created by wills, powers of attorney so far as they concern financial affairs or personal care, and documents that create or transfer interests in land and must be registered to be effective against third parties.

Contracts about land, and personal guarantees, need more

Section 59 of BC's Law and Equity Act sets special rules. Under section 59(3), a contract respecting land, or a disposition of land, is not enforceable unless one of three things is true:

• Writing. There is a writing signed by the person being sued, or that person's agent, showing that the contract was made and giving a reasonable indication of the subject matter.
• Acts showing a contract. The person being sued did something, or went along with something the other side did, that indicates a contract consistent with the one alleged. Section 59(4) says paying or accepting a deposit or part payment counts.
• Reasonable reliance. The person alleging the contract changed position in reasonable reliance on it, so that an inequitable result can be avoided only by enforcing it.

A contract to grant, or the grant of, a lease of land for three years or less is outside these rules (s 59(2)). Section 59(7) says a writing can be enough even if a term is left out or wrongly stated.

Personal guarantees and indemnities have their own rule in section 59(6), which covers any such promise other than one arising by operation of law or imposed by statute. It is not enforceable unless evidenced by a writing signed by the guarantor or indemnitor (or their agent), or the guarantor or indemnitor has done an act indicating that one consistent with the one alleged was made. A verbal promise to cover someone else's debt is risky to rely on.

If a court decides an alleged gift or contract cannot be enforced, section 59(5) lets it order restitution of a benefit received, compensation for money spent in reliance, or both.

Do not wait too long

Under section 6(1) of the Limitation Act, a court proceeding on a claim generally must start within two years after the day the claim is discovered. A verbal deal that has gone wrong is subject to the same clock as a written one, and evidence fades fast. For the claims and forums available once a deal breaks down, see Breach of Contract in BC and CRT, Small Claims or Supreme Court?.

Protecting yourself next time

• Confirm the key terms in a text or email the same day: who does what, for how much, and by when.
• Keep payment records and use memos that describe what the payment is for.
• For anything involving land, a personal guarantee or a large sum, put it in a signed written agreement.
• For a business, standard written terms save arguments later; see Contracts every BC small business should have in writing.

Relying on a deal that was never written down? Get advice before it unravels

Our litigation lawyers can review the messages, payments and other evidence of your agreement, explain whether it is likely enforceable, and help you pursue or answer a claim.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.