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You may enter into business arrangements with other people without a written agreement. Usually, this is because of the relationship you already have with the other person, such as a family member or close friend. Unfortunately, it means that if someone were to stop performing what was agreed to in your non-written contract, you might have to take additional steps to pursue a person for breach of the agreement. Therefore, we recommend that any arrangements have a written contract to back them up to avoid any uncertainty. In the absence of a written contract, this article covers the steps you need to take to enforce your arrangements.

Do You Have an Enforceable Contract?

The first thing you will need to establish is that you have a legally binding contract. The elements that a contract should generally possess are:

  • an offer and an acceptance of the terms of the agreement;
  • consideration, which is an exchange of something of value between the parties. For example, purchasing a product is considered a contract where goods are exchanged for money; and
  • an intention to create legal relations, which is an expectation by both parties that they will be bound by the terms of the agreement. This can be shown if parties begin to fulfil their obligations under the oral agreement.

Example

Kate hires a gardener to mow her lawn and maintain her front yard. She finds a number from her local newspaper and calls Fred the gardener. Over the phone, Fred proposes that he will come to Kate’s place on Wednesday morning to mow the lawn and that his services will cost $100 (offer), to be paid after he finishes the mowing. Kate agrees (acceptance) and tells Fred her address and time to arrive. On Wednesday, Fred arrives with his mowing equipment (intention to create legal relations). He mows the lawn and is paid the money from Kate (consideration).

What Are the Terms of Your Contract?

Once you have established that there is an enforceable contract, you need to identify the terms of the contract that were agreed upon. If there is no written contract, you can find the terms of an agreement from multiple sources, including:

  • any written evidence, such as an email, letter, text message, or any transactional documents such as an invoice, purchase order or receipt;
  • verbal communication, sometimes including statements that are made before  entering into an agreement; or
  • implied terms, such as through the conduct of a party, surrounding circumstances, law, or common industry practices.

Generally, verbal communication or implied terms are harder to enforce and may require supporting evidence to back up your claim.

What Type of Breach Has Occurred?

The nature of the breach will inform the type of action you should take against the other person.

1. Material Breach

A material breach is one that goes against one of the key elements of the contract. For example, if Fred refuses to mow Kate’s lawn, it would be considered a material breach of the agreement. If the conduct is a material breach, you can consider the contract to have ended. Also, if you have suffered damage as a result of the breach, you may be entitled to damages.

2. Minor Breach

A minor breach is conduct that goes against a term of the contract but is not substantial enough to consider the contract terminated. For example, if Fred completes the mowing but has slightly inconsistent patches of grass.

3. Anticipatory Breach

An anticipatory breach occurs if a party states they no longer want to fulfil their end of the contract before the contract begins. This might entitle you to damages if you began to spend resources in relation to the agreement. However, your first remedy may be to pursue the other side to fulfil their obligations under the contract.

What Remedies Can I Seek for a Breach?

Generally, there are two main types of remedies that you can seek against someone who has breached the contract.

  • damages: if you have suffered any form of loss due to the breach, you may be entitled to recover that loss back from the other party in the form of damages; or
  • specific performance: you may be able to compel the other party to either fulfil their obligations under the contract or perform additional tasks that will prevent, mitigate, or remedy any loss you have sustained.

Key Takeaways

You may have a claim against another party for breach of a non-written contract. However, there are many steps required to prove the breach occurred. It is always recommended to include all terms in a written contract, which can be agreed to and relied upon by both parties. If you need any assistance enforcing a verbal contract that was not in writing, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What types of breaches can occur under a contract?

1. A major breach, which can render the contract terminated;
2. A minor breach, which requires the breaching party to rectify; and
3. An anticipatory breach, in which a party decides they no longer wish to proceed with the contract.

How can I identify the terms of my agreement in a non-written contract?

If there is a non-written contract, you will need to rely on external sources such as evidence in writing (texts, emails, invoices, receipts) and verbal communication, or imply terms into your agreement through party conduct, overriding law, or common industry practices.

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