This article focuses on the validity of contracts in Zimbabwean law, looking specifically at the validity of verbal contracts.
In Zimbabwe, a contract is required to contain essential elements (essentialia), to be deemed as valid. The essentialia of a contract are offer and acceptance, existence of consideration, capacity to enter into a contract, intent to enter into the contract, and creation of a binding relationship.
Under normal circumstances, a contract is agreed to in writing, however in some instances, the contracting parties may conclude a verbal agreement.
Is a verbal contract valid?
In our law, in the case of Delta Beverages (Private) Limited v Pyvate Investments (Private) Limited and Another, verbal contracts were held to be enforceable and are seen to give rise to valid contractual relationships. An exception to this rule, is if it is required by law that an agreement be in writing in order to be deemed as valid, examples include an agreement for the sale of land, mining leases and other related contracts. In terms of the Consumer Protection Act [Chapter 14:44], the Minister of Industry and Commerce may prescribe categories of consumer agreements that are required to be in writing.
A court will endorse a verbal agreement as valid if all the essentialia of a contract exist. The essential elements of a verbal contract are the same as those of a written contract. As such, it must be clear to the court that both parties intended to contract and there was a meeting of the minds of the parties or a reasonable belief that there was consensus to contract.
Why might parties conclude a verbal contract and what are the risks involved?
Parties may enter a verbal contract to avoid unwanted administration. Small businesses are prone to prefer verbal contracts over written agreements due to the flexibility offered for day-to-day tasks. Verbal contracts are also less-time consuming to conclude.
Although this may seem to be an easier, cheaper, and less time-consuming option, there are a few risks that a business may encounter when entering a verbal contract:
- No proof of the terms and conditions of the agreement. This may lead to a misunderstanding or a non-fulfilment of obligations, which may breach upon the rights of the other contracting party.
- Disputes may easily occur as the parties may have different opinions on what was agreed to. This may lead to expensive litigation proceedings. Having a readily available written contract reduces the chances of having costly and time-consuming litigation. If there is not enough evidence to prove the existence of the contract, a court of law may refuse to enforce the terms of the verbal contract.
- Breach of confidentiality by a contracting party may easily occur, as there is no formal document which sets out the confidential and non-disclosure provisions protecting sensitive information.
- The higher the value of the transaction not agreed to in writing, the greater the risk to the business of not having a clear written agreement setting out the terms and conditions of the arrangement, especially if the business is incurring costs in terms of the agreement, for example, the costs of supplying a customer.
How to prove a verbal contract
In the case of Delta Beverages, it was held that the party who alleges the existence of an oral contract bares the onus to prove its existence. A verbal contract can be proved using evidence showing correspondence between the parties or evidence of the performance of the contract. This may include emails or any other written correspondence, transactional statements, notes made at the time of the agreement, supplies and or specifications and witnesses. The evidence will need to show the intention of the parties and the dealings between the parties after the alleged contract was concluded. Verbal contracts are usual quite difficult to prove due to lack of tangible evidence. This can often lead to “he said, she said” scenarios which will not be upheld by a court of law.
In light of the above, in the event that a dispute arises between the parties to a verbal contract, the existence of the contractual agreement may be difficult to prove if there is no documentary evidence. This may result in costly litigation and a loss of large amounts of money, especially for the claiming party who may be claiming specific performance. When balancing the potential loss and the cost of engaging a lawyer to draft a contract, the latter is outweighed. Verbal contracts are not advised for any line of business.