Verbal Agreements In Australian Law: Are They Binding?

Plenty of business deals in Australia start with a conversation and a handshake. You agree on a price over the phone, you green-light a service on a Zoom call, or you tell a supplier you’ll “go ahead” next month.

But if something goes wrong later, will a court back you up? And when do you absolutely need to put it in writing?

In this guide, we’ll explain how verbal agreements work under Australian law, when they’re legally binding, where the risks lie, and practical steps to protect your business. We’ll keep things simple and focused on what actually matters day to day for small business owners.

What Is A Verbal Agreement?

A verbal agreement (also called an oral contract) is any agreement made using spoken words rather than a written document. It can happen in person, on the phone, or via video call.

Verbal agreements are common in business. They can cover a one-off job, an ongoing supply arrangement, a price change, or even a partnership understanding.

The key question is whether a verbal agreement forms a legally enforceable contract - and if so, can you prove what you agreed?

Are Verbal Agreements Legally Binding In Australia?

Yes - a verbal agreement can be legally binding in Australia if it contains the essential elements of a contract. It does not need to be in writing to be valid.

The Essentials Of A Contract

• Offer and acceptance: One party makes a clear offer and the other clearly accepts it. If you want a refresher on this, see offer and acceptance.
• Intention to create legal relations: Both parties intend the agreement to be legally binding (not just a casual chat or a social promise).
• Consideration: Each side provides something of value (for example, money, goods or services).
• Certainty: The core terms are sufficiently clear (what’s being supplied, price, timing, any key responsibilities).
• Capacity: Each party has legal capacity to contract (for example, not a minor in most situations and not lacking mental capacity).

A contract - verbal or written - can also be affected by “vitiating” factors. If there’s misrepresentation, mistake, duress or undue influence, the agreement may be unenforceable even if the basic elements are present.

When The Law Requires Writing

While many verbal agreements are enforceable, some types of contracts generally need to be in writing due to state and territory laws (or to protect your rights fully). Requirements vary by jurisdiction, but commonly include:

• Contracts for the sale or other dispositions of interests in land: Often required to be in writing and signed (for example, sale of real property). Leases over certain terms frequently must be in writing and may need registration to secure your interest.
• Guarantees: In many jurisdictions, a promise to answer for another person’s debt generally must be in writing and signed by the party to be bound.
• Certain credit and finance arrangements: These may be regulated and subject to formal documentation requirements.
• Regulated sectors: Some industries impose documentation and disclosure obligations (for example, franchising requires compliance with the Franchising Code of Conduct and written disclosure documents).

The takeaway: if your agreement involves land, a guarantee, regulated credit, or a sector with specific documentary requirements, you’ll almost certainly need a written, signed document to be safe. When in doubt, get advice before you proceed.

When Verbal Agreements Can Fall Over

Even where a verbal agreement is legally capable of being enforced, there are practical risks that make disputes harder (and more expensive) than they need to be.

• Proof problems: Disputes often become “your word versus theirs”. Without a document, it can be difficult to prove what you agreed - or that you agreed at all.
• Vague or incomplete terms: If the price, scope, delivery dates or key responsibilities aren’t clear enough, a court may find there was no certainty and decline to enforce the agreement.
• “Agreements to agree”: If you’ve left crucial matters “to be agreed later”, the agreement can be too uncertain to bind either party.
• Mixed signals before acceptance: Confusing pre-contract communications can undermine formation (for example, where a statement was only an invitation to treat, not a genuine offer).
• Statutory writing requirements: As above, some contracts generally need to be in writing (for example, guarantees and land deals).
• Consumer law issues: If your verbal promises mislead or omit key facts, you risk breaching the Australian Consumer Law (ACL) - regardless of whether anything was written down.

Bottom line: verbal agreements are legally possible, but they are usually riskier and harder to enforce than written contracts.

How Do You Prove A Verbal Agreement?

If a dispute arises, courts look for objective evidence that a contract existed and what its terms were. Helpful evidence includes:

• Follow-up emails or texts confirming what you discussed (for example, “as agreed today, we’ll supply 500 units at $20 each, delivery by 30 June”). A short note can also clarify whether an email can be legally binding by itself.
• Witnesses who heard the conversation.
• Contemporaneous notes or calendar entries you made after the call.
• Conduct consistent with the deal (delivery of goods, work commenced, part payments made).
• Invoices, purchase orders, payment confirmations or bank records.

Thinking about recording the call? Laws on recording private conversations vary between states and territories. Always check first - start with whether recording a phone call is legal in your situation.

Practical tip: immediately after any verbal agreement, send a brief written summary and ask the other party to confirm. Even a “yes, that’s correct” reply is powerful evidence.

Best Practice For Business: Put It In Writing

Verbal agreements are common, but written contracts are how you run a business with certainty. A short, tailored document will help you:

• Set clear expectations (scope, price, timelines, responsibilities, changes and termination).
• Manage risk (liability, indemnities, warranties and limitation of liability clauses).
• Streamline disputes (notice requirements, escalation steps, governing law, venue).
• Comply with laws (consumer guarantees, privacy, data security, industry rules).

Documents to consider for typical SME arrangements include:

• Service Agreement: Sets out the services, fees, milestones, variations, IP and risk allocation for your client work.
• Website Terms and Conditions: If you sell online, these terms govern orders, pricing, delivery, refunds and acceptable use.
• Non-Disclosure Agreement (NDA): Protects confidential information you share with suppliers, partners or potential investors.
• Supply Agreement: Clarifies pricing, quality standards, lead times, delivery and risk when buying or selling goods on repeat.
• Employment Contract or Contractor Agreement: Outlines duties, pay, IP and post-employment restraints when you bring people on.
• Shareholders Agreement: If you have co-founders or investors, this covers decision-making, equity, exits and dispute processes.

You won’t need every document listed above, but most growing businesses will need several of them. Getting your core contracts right early saves time and avoids headaches later on.

What If Someone Breaks A Verbal Agreement?

If a party doesn’t do what they promised, you may be able to enforce the verbal contract. Practically, the steps often look like this:

• Gather your evidence (messages, notes, invoices, witnesses, delivery or performance records).
• Contact the other party to try to resolve it informally - propose a clear, reasonable fix and a timeframe.
• Send a formal letter of demand. If appropriate, a carefully drafted notice or cease and desist letter can prompt quick action.
• Seek legal help to negotiate, mediate or outline your options for a breach of contract claim.
• As a last resort, commence proceedings. A court will examine whether a contract existed and, if so, its terms and any loss.

Whatever the outcome, treat the dispute as a signal to tighten your process. Put clear agreements in place so future work starts on strong footing.

Key Takeaways

• Verbal agreements can be legally binding in Australia if the elements of a contract are present, but they are harder to prove and riskier than written contracts.
• Some agreements are generally required to be in writing (for example, land-related contracts, guarantees and certain regulated arrangements), with rules varying across states and territories.
• The biggest practical risk with verbal deals is evidence - follow up right away with a short written confirmation so there’s a clear record.
• For day-to-day business, use tailored written contracts such as a Service Agreement, Website Terms and Conditions, NDAs and Employment Contracts to protect your rights and manage risk.
• If a verbal agreement goes wrong, gather your evidence, try to resolve it early, and escalate with a formal letter and legal support if necessary.

If you’d like a consultation about verbal agreements or getting the right contracts in place for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.