This article is written by Leela Madhuri of 9th semester of BA.LLB of G.S.K.M Law College affiliated with Adikavi Nannya University, an intern under Legal Vidhiya.
Abstract:
The article explores the evolving relationship between verbal and nonverbal agreements in contract law, underscoring the need for open communication and mutual acceptance. Contracts, the foundation of current trade, take different forms, including written and nonverbal agreements. It also addresses the legal recognition and understanding of nonverbal agreements like gestures and behavior. The article examines relevant court decisions and legal precedents to shed insight into the complex issues of contract law application in several settings, focusing on the difficulty of verbal contracts and the crucial role of documentation in litigation. In addition, it focuses on the social and language aspects that influence people’s interpretation of nonverbal clues, giving users a better knowledge of contract law.
Keywords:
Contracts, Verbal Agreements, Nonverbal Agreements, Offers, Acceptance, Legal capacity, Oral contracts, Written contracts, legally binding agreements
Introduction:
Verbal and nonverbal agreements are essential in business and personal interactions because they serve as a framework for trust and responsibility. Understanding the legality of these agreements is critical for individuals to understand their rights and duties. The combination of contract law and verbal or nonverbal agreements is a complicated field of research that involves problems regarding the legality of non-written agreements formed by conversations, greetings, gestures, and technological interactions. Factors impacting the validity of these non-written agreements are critical to ensuring their legal enforceability. Recognizing the significant differences between verbal and nonverbal commitments is crucial for protecting rights and obligations, building trust, and maintaining transparency in personal and professional interactions. These agreements, which may vary from basic oral contracts to massive economic transactions, are controlled by legal principles and practical implementations. Real-life instances and historical cases demonstrate the everyday applications of these agreements, allowing business professionals, consumers, and everyone interested in the laws governing these agreements to get a better understanding.
Understanding Contract Law:
In our day-to-day lives, we enter into several transactions to satisfy our requirements with other parties or people. Such contact forms the basis for entering into an agreement, which ultimately results in a contract. Contracts are constitutionally binding agreements that outline specific rules for an agreement between two parties. They can be written or spoken, with written contracts being utilized by enterprises because of their ease of understanding and reduced confusion, making them simpler to enforce [1]. In simple terms, a contract is an agreement executed between two or more parties subject to specified terms and conditions in exchange for legal consideration [2].
For example, X and Y entered into an agreement. X promised Y to sell his property for ₹1,00,000 and Y agreed to purchase it for the said amount. It is a contract between X and Y.
In a contract, there are two parties, namely the offeror and the acceptor. In the above example, X is an offer and Y is an acceptor. The point to be noted is that the contract must always be legal and enforceable Unlike an agreement, which may be moral and may not be enforceable.
Elements of Contracts:
A contract must include the following characteristics to become lawfully valid. They are [3];
- Offeror and Acceptor:
A contract requires two parties. One party makes an offer. The other party accepts it. The contract act needs both parties to make sure that the offer is clear and transparent, with cooperation being essential for avoiding breaches and ensuring that all parties have agreed to the same terms and conditions.
Harbhajan Lal vs. Harcharan Lal [4]:
The defendant in the present case advertised a prize for anyone who could locate his missing child. In response to the advertising, the plaintiff tracked out and turned out the child to the defendant. In a lawsuit against the defendant, the court interpreted the advertising as a public offer and determined that the plaintiff was entitled to the award.
- Capacity to Contract:
The parties to the contract must be competent to enter into a contract. According to Section 11 of the Indian Contract Act, any person is capable of entering into the contract, provided
1. They must be a major
2. They must have a sound mind.
3. They must not be disqualified by law enforcement from entering into a contract.
Mohoiribibi vs Dharmadas Ghose [5]:
In this case, a minor mortgaged his residence with a money lender worth 20,000/- and obtained an advance of 8000/-. He afterward avoided the deal and failed to refund the money. The minor took measures to set aside the mortgage. It was decided that the contract was unenforceable since an agreement with an underage party was invalid.
- Free Consent:
Consent means to agree to, accept, or indicate willingness. According to contract law, free consent is defined as two or more people agreeing on the same thing in the same sense. In simple words, when there is no consent, there is no contract.
For example, X threatens Y with a pistol to come into an arrangement with Z. The agreement will be null and void since Y engaged without his consent.
- Lawful Consideration:
Consideration is one of the most essential components of contract creation. It implies something in return. It is a contract price. It refers to both sides. To be valid and enforceable, a contract must have legal consideration. In other words, an agreement without compensation is null and void.
For example, X sells his house to Y for ten lakhs. Here, A is the lawful consideration for ten lakhs. Similarly, B is lawfully considered the house. Therefore, it is held that a contract lacking consideration is invalid.
- Lawful Object:
To be legitimate, a contract’s object must be lawful. A deal made against the interests of the other public is regarded as being against public policy. In other words, an agreement deemed harmful to the general welfare is said to be opposed.
For example, X and Y enter into an agreement to commit an illegal act. Here, the contract will be invalid as the legal object is missing.
Importance of Contracts:
Legal contracts are essential for ensuring agreement execution, safeguarding individuals and organizations from disputes, and promoting certainty and predictability in commercial and personal interactions. They offer a legal foundation for establishing legally binding contracts and ensuring that obligations are honored. The agreements also make trade easier by clarifying terms and demands, resulting in smoother operations. They also provide a method for resolving contractual disputes by holding parties accountable for their acts within the bounds of the law. Understanding contract norms is essential for individuals and organizations to deal with interactions successfully and have legal recourse in the event of a dispute.
Overview of verbal agreements:
The term “verbal agreements” refers to contracts formed orally that are enforceable in court. Due to the absence of written confirmation, they might be challenging to implement. The legitimacy of a verbal agreement is determined by its capacity to show its presence and agreed-upon terms, which are frequently supported by evidence such as witnesses, emails, or texts. Business activities, job contracts, real estate negotiations, and personal agreements are all examples of verbal agreements. Verbal agreements are binding contracts that require an offer and acceptance from both parties, along with specific terms and circumstances. All parties engaged must have legal capacity. Depending on the jurisdiction and kind of contract, oral agreements are recognized to be enforceable [6]. Understanding verbal agreements is critical for making informed decisions since they provide flexibility and simplicity of formulation but do not provide solid proof. Written contracts appear more reliable, so it is vital to understand how legal systems consider verbal agreements.
Pros and Cons of Verbal Agreement:
Verbal agreements provide various advantages, including flexibility, cost-effectiveness, and the chance of simple adjustments or additions. They may be developed quickly and informally, which makes them useful for simple or immediate issues. Verbal agreements also reduce the need for complex legal terminologies, making them accessible to people who do not have legal training. They also strengthen bonds between people involved in communication or economic transactions by focusing on open discussion rather than strict contractual duties. However, there are significant risks linked to the lack of legal enforcement. Parties must recognize that developing the validity of an agreement with documentation becomes difficult, making it critical for all parties involved to be aware of their limits and possible risks.
The absence of written documentation is a fundamental drawback of verbal agreements, regardless of their simplicity. This lack of documentation can lead to misunderstandings and arguments, making it harder to prove the legitimacy of any contract. Verbal agreements are also open to misinterpretation caused by distinct memory recollections. Additionally, oral agreements could not be as legally enforceable as written contracts, making it easier for one side to violate them without facing consequences. Despite its oral origins, a verbal contract can be influenced by memory defects, making it critical to maintain a recorded agreement for its continuous existence.
Overview of Nonverbal Agreements:
Non-verbal agreements and written documentation are essential to creating a contract. They are written agreements signed by both parties. Because there is tangible proof, written agreements are better to prove than oral ones. Nonverbal agreements are preferred since they represent the agreement’s terms and conditions and give clarity. Any violation of the Indian Contract Act would result in a breach, so both parties must agree without being intimidated. In conclusion, nonverbal agreements have greater weight than verbal ones. A written agreement signed by both sides guarantees that all parties are on the same page and enables record-keeping. Nonverbal agreements that demonstrate mutual intent are legally enforceable agreements between parties that indicate their willingness to engage in a contract even though they do not express it directly in words.
Pros and Cons of Nonverbal Agreements:
Nonverbal agreements have several benefits over formal written contracts, such as flexibility, efficiency, informality, inferred conditions, and cost savings. They permit parties to adjust to evolving situations without having to make regular changes, saving time and effort. Informal communication promotes trust and unity, particularly in personal or professional interactions. Implied agreements based on prior contacts and standard practices eliminate the need for considerable negotiation and verification. Nonverbal contracts save money, particularly in smaller transactions, by avoiding legal and administrative fees.
Contract nonverbal agreements can be restricted owing to ambiguity, lack of clarity, insufficient documentation, and unforeseen results. These agreements can lead to disagreements and legal problems since one party may not consider the other party’s consent genuine. Nonverbal agreements’ legality changes based on jurisdiction and circumstances, and parties may not fully comprehend their rights and duties. Furthermore, unlike formal contracts with emergency clauses, nonverbal agreements could lack enough protection against changes in circumstances or unexpected events.
Difference between verbal and non-verbal agreements:
Contract law is difficult to understand, especially when verbal and nonverbal agreements interact. Verbal contracts are simple, including conversations, bargaining, and mutual understanding. They may be legally effective if both parties show a clear purpose to establish contractual relationships and the fundamental components of a contract are fulfilled. Nonverbal agreements, on the other hand, pose distinct difficulties. Verbal agreements are legally binding, yet they might be difficult to prove in court without written proof. Nonverbal agreements are often challenging to implement as there cannot be identified conditions or requirements. It is preferable to have an official contract to avoid misunderstandings and arguments. A written Agreement provides an official record that can be quickly referred to and enforced if essential. They can be drawn from the behaviors, signs, and reserved approval of the persons concerned. It is vital to write contracts in writing to avoid these issues since it provides clarity and prevents misconceptions. Finally, when verbal and nonverbal agreements cross in contract law, it is critical to carefully examine the parties’ conditions, intents, and actions. While verbal contracts might be legally binding, putting them in writing and maintaining clarity can help avoid possible conflicts and give a firm platform for enforcing contracts.
Case Laws:
- Pennzoil Co. v. Texaco Inc [7]:
Pennzoil won an oral agreement to sell Getty Oil to Texaco but later sold it for a higher price. Pennzoil sued Texaco, alleging breach of the contract, resulting in a $9.1 billion settlement plus interest and penalties, which makes this case the largest US damages award.
- Joachim v. Weldon [8]:
The plaintiff, a driller, stated that the defendant approached him about a leasing interest. He had bought this plant seed from the defendant and attempted to convince him to drill the lease. He contacted numerous drilling companies but was unsuccessful until Paul Hammer dug the well and secured the lease assignment. Hammer later wanted an overriding royalty stake, which the defendant denied. The defendant claimed to have obtained the lease but never discussed digging the well with the plaintiff. In this case, the court considered that the plaintiff and defendant entered into an oral agreement, agreeing to give the plaintiff an interest in the lease if they found someone to drill the well.
- S.V Narayanaswamy vs. Savithramma [9]:
The appellant filed an action for the particular execution of a nonverbal agreement, proving and displaying the respondent’s checks. The court deemed the appellant liable for submitting the relevant proof.
Features Influencing Verbal and Nonverbal Agreement Validity:
The validity of verbal and nonverbal agreements can significantly influence their effectiveness and enforceability in various settings. Trustworthiness, prior performance, cultural norms, the environment, industry practices, technology, and legal issues significantly impact the validity of verbal and nonverbal agreements. Written agreements may be more legitimate if the parties are trustworthy and reliable and have a track record of performance. Cultural differences, industry-specific conventions, and proof can impact the legitimacy of verbal agreements due to differences in communication methods and expectations. The use of technology, such as electronic contracts and digital recordkeeping, might create concerns about the legitimacy of electronic signatures and communication techniques. Legal precedents and territorial variances also play a role in deciding an agreement’s legality. Understanding these characteristics and adjusting to individual situations can assist parties in developing agreements that are more likely to be recognized and enforced.
Conclusion:
In conclusion, verbal and nonverbal agreements are essential in economic and legal dealings, but they are risky since they are informal. Individuals and corporations should prioritize clear, well-documented contracts to minimize these dangers. As the legal environment changes, it’s becoming increasingly important to understand whether verbal or nonverbal agreements are suitable and legally enforceable. The future of verbal and nonverbal agreements will continue to be impacted by technology, digital communication, and the increase of cross-border contracts in the global economy. In the complicated world of contract law, evaluating verbal and nonverbal agreements and focusing on their details and validity is essential.
References:
- UNDERSTANDING CONTRACT LAW
- 8 Essential Elements of a Valid Contract
- Introduction To Essentials Of A Valid Contract & Its Examples
https://testbook.com/ugc-net-commerce/elements-of-a-valid-contract
- Is a verbal contract legally binding?
https://www.pandadoc.com/ask/are-verbal-contracts-and-agreements-legally-binding/
- Oral Contract
- Case Laws: Requirements of Oral exchange and whether oral exchange reduced in writing is valid if it is not signed by one of the executants.
[1] Contract Law: Know the Fundamentals, https://ironcladapp.com/journal/contracts/contract-law/ (Last visited on 14 September 2023).
[2] Contract law notes, https://blog.ipleaders.in/law-of-contracts-notes/ (Last visited on 14 September 2023).
[3] Essentials of a valid contract, https://blog.ipleaders.in/essentials-of-a-valid-contract/ (Last visited on 14 September 2023).
[4] Plaintiff entitled to claim the reward as the open offer was duly accepted, https://www.lawyersclubindia.com/judiciary/plaintiff-entitled-to-claim-the-reward-as-the-open-offer-was-duly-accepted-4482.asp (Last visited on 14 September 2023).
[5] Case Analysis-Mohiribibi v/s Dharmodas Ghose, https://www.legalserviceindia.com/legal/article-232-case-analysis-mohori-bibee-v-s-dharmodas-ghose.html (Last visited on 14 September 2023).
[6] Oral Contract: Definition, Example, How to Prove and Enforce, https://www.investopedia.com/terms/o/oral-contract.asp (Last visited on 15 September 2023).
[7] Pennzoil Co. v. Texaco Inc., https://www.oyez.org/cases/1986/85-1798 (Last visited on 15 September 2023).
[8] Joachim vs. Weldon,
https://law.justia.com/cases/oklahoma/supreme-court/1962/36196.html (Last visited on 15 September 2023).
[9] Enforceability Of Oral Agreement In India, https://www.ipandlegalfilings.com/enforceability-of-oral-agreement-in-india/ (Last visited on 15 September 2023).
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