WHY VERBAL AGREEMENTS ARE A REAL RISK TO YOU AND YOUR BUSINESS
Supposed verbal or handshake agreements open you up to “gaming” by the other party.
A verbal or handshake agreeement may give you and your counterparty a warm and fuzzy feeling that both parties trust each other, and that this ‘trust’ obviates the need to commit the the agreement to writing. This misplaced emotion is often present when 2 parties have no prior business relationship and have not made any due diligence enquiries about the other’s historical modus operandi.
As an example, you enter into a verbal agreement with a person to refurbish your kitchen either at home or at your business premises. The basis of the agreement is that you will be permitted to have input into the cost of the components. An estimate of hours is given by the refurbisher and an hourly rate is agreed. There is no written record of this- just that you say that it is what was agreed. There are no witnesses to your assertion of the circumstances of the agreeement. Further there is no written quote submitted by the refurbisher. Believe it or not, this is a real case.
So the job is completed in longer time than expected, and with you having no input into the cost of the components. You end up with a bill twice the amount that you expected. You ring your solicitor and complain that you will not pay. He says to try and settle it. You are hot under the collar and do not take his advice.
The refurbisher then commences an action in QCAT (Qld Civil and Administrative Appeals Tribunal) against you for payment of his full bill. You file a defence based on what you say he told you (what is called a “he said, she said” defence.) Compulsory mediation fails. You are headed for a full QCAT hearing where, unless you obtain special leave to have your solicitor appear, you will have to represent yourself.
Now, what will the QCAT Commissioner decide at the hearing? Will it be that your credibility is at stake because you were not attentive and sensible enough to insist on a quote in writing, which you duly varied, if needed, before signing off on it and having the refurbisher start the work OR will he decide based on the refurbisher’s version of events, but take a dim view of him not putting a quote in writing, but offset this with the fact that you saw what was happening in the refurbishment and did not call him to account?
So, your chances look 50/50, at best. Do you want to try and settle with the refurbisher? If you do, the refurbisher has ‘gamed’ the situation to his advantage. But perhaps you should settle because of the stress and distraction the whole matter is causing you and your partner.
All this could have been avoided if you, as the party requiring the goods and services, had insisted on a written quotation which you carefully studied and amended to suit your purposes. Of course, before signing off on it, you would have carried out some reference checks on the refurbisher and may well have found out that he has a habit of playing such games, as to one he is playing with you. Anyway, if you had proceeded with him, you would have taken a daily interest in progress of he project and compared what was being said and what was happening to the contents of the accepted quote, which is your contract with the refurbisher. You may even have seen fit to take legal advice before signing off on the quote.
If you are anywhere in Australia or overseas and wish to utilise the services of Wilson Haynes solicitors – conveyancers – business advisers, please call our Principal, Jim Wilson on 07-55363055 or email email@example.com and he will have a cost-free, obligation-free discussion with you about your requirements.
This article was written by Jim Wilson B.Com., LL.B Principal – Wilson Haynes solicitors, conveyancers, business advisers.