Oral Contract Cases in the UK: Understanding the Law
Contracts form the backbone of modern business agreements, but what happens when a contract is made orally instead of in writing? While verbal contracts are legally binding in the UK, they can be difficult to prove in court.
In this article, we’ll explore some key oral contract cases in the UK and what they can teach us about the law.
What is an oral contract?
An oral contract, also known as a verbal contract, is an agreement made between two parties without any written documentation. Instead, the terms of the contract are discussed orally and agreed upon.
While oral contracts are legally binding in the UK, they can be difficult to enforce because they rely heavily on the credibility of the parties involved. Without written evidence, it can be challenging to prove what was agreed upon and whether the terms were fulfilled.
Oral Contract Cases in the UK
Case 1: Doyle v. Olby (Ironmongers) Ltd. [1969]
In this case, a sales representative named Mr. Doyle was promised a commission by his employer, Olby (Ironmongers) Ltd., based on the sales he generated. Doyle claimed that he had agreed with Olby’s managing director, Mr. Olby, that he would receive a commission of 2.5% on all sales he generated. However, when Doyle left the company, Olby refused to pay him the commission.
The court held that there was an oral contract between Doyle and Olby, despite the absence of a written agreement. The court ruled that the commission was payable, and Doyle was awarded the full amount.
This case is significant because it demonstrates that oral contracts can be legally binding and enforceable even without written evidence.
Case 2: RTS Flexible Systems Ltd. V Molkerei Alois Muller GMBH & Company KG [2010]
In this case, an oral contract was made between RTS Flexible Systems Ltd. (RTS) and Molkerei Alois Muller GMBH & Company KG (Muller) for the supply of packaging equipment. The contract was made orally during a phone call between the two companies’ representatives and was later confirmed in writing.
However, when Muller refused to pay RTS for the equipment, RTS brought a claim to court. The court found that there was a binding contract between the parties, even though the contract was made orally.
This case is significant because it shows that an oral contract can be legally binding even if it is later confirmed in writing.
Case 3: Blue v. Ashley [2017]
In this case, a dispute arose over a contract between a former employee of Sports Direct, Mr. Blue, and the company’s owner, Mike Ashley. Mr. Blue claimed that he had made an oral agreement with Mr. Ashley to pay him £15 million if he could improve the company’s share price to £8 per share.
The court ruled that there was no legally binding contract between the parties because the agreement was too uncertain. The court found that the terms of the contract were not sufficiently clear and that there was no evidence that the parties had reached a final agreement.
This case is significant because it highlights the importance of defining the terms of an oral contract clearly. If the terms of the contract are uncertain or ambiguous, it may not be enforceable in court.
Conclusion
While oral contracts are legally binding in the UK, they can be challenging to prove in court. The credibility of the parties involved is crucial, and without written evidence, it can be difficult to determine what was agreed upon.
However, the oral contract cases discussed above demonstrate that it is possible to enforce an oral contract in court. To improve the chances of success, it is essential to define the terms of the contract clearly and to confirm them in writing as soon as possible after the agreement is made.