Verbal agreements are a part of doing business in Australia - whether it’s a quick handshake, a chat over the phone, or even a text confirming “It’s a deal!”. But when it comes to the law, how much weight do these types of agreements really carry? Are verbal agreements legally binding in Australia, or do you need a written contract for your commitments to be enforceable?
If you’re running a business or entering into agreements - with suppliers, clients, or even friends - understanding the rules around verbal contracts in Australia is crucial. This not only helps you avoid misunderstandings, but it also protects your interests and gives you confidence as you negotiate deals.
In this guide, we’ll walk you through how verbal agreement law works in Australia, what makes a verbal contract binding, the risks involved, and when you absolutely should put things in writing. We’ll also answer common questions, like “Is a text message legally binding in Australia?”, and point out some practical steps to stay protected.
What Is a Verbal Agreement?
A verbal agreement (sometimes called an oral contract) is an agreement made through spoken words - either face-to-face, over the phone, or using voice messages. Unlike a written contract, nothing is physically drafted or signed, and yet, both parties agree to do (or not do) something.
For example, let’s say you agree with a landscaper, over the phone, that they’ll mow your property every fortnight for $150. You both say “yes” to the terms and agree on a start date, but nothing is written down. This is a classic verbal agreement. So, is this enough for the law to hold both parties accountable?
Are Verbal Agreements Legally Binding in Australia?
The short answer is: yes, verbal agreements can be legally binding in Australia - provided they meet certain requirements under Australian contract law.
Just like a written contract, a verbal agreement is valid if it contains these key elements:
- Offer: One party proposes a deal (“I’ll mow your lawn every fortnight for $150”)
- Acceptance: The other accepts those terms (“Yes, I agree”)
- Consideration: There’s an exchange of value (usually money for services or goods)
- Intention to Be Legally Bound: Both parties intend to create legal obligations (it’s not just a casual chat)
- Certainty: The terms are clear enough to be enforced (what, when, how much, etc.)
If all these elements can be shown, a court may find that a verbal contract exists - and if either side breaks it, the other may have the right to pursue a legal remedy (for example, seeking payment for work done).
However, proving a verbal contract can be challenging, especially if there’s a dispute about what was actually agreed. That’s why, even though verbal contracts are generally legal, it’s usually risky to rely on them alone in business.
When Are Verbal Contracts Not Legally Binding?
While verbal agreements can be binding in Australia, there are some important exceptions and limitations to keep in mind.
Some Agreements Must Be in Writing
The law requires certain types of contracts to be in writing to be enforceable. Common examples include:
- Contracts for the sale, transfer, or lease of land or property: (must be written under the law of most states and territories)
- Consumer credit agreements: (regulated by the National Credit Code; usually must be written and documented)
- Certain guarantees: For example, personal guarantees for another person's debts
So, if you’re entering into these types of deals, making a verbal agreement alone is not enough. You need a properly drafted written contract for your rights to be protected.
Uncertain or Incomplete Agreements
A contract (verbal or written) requires sufficient certainty and completeness. If the terms are too vague (“I’ll help you out with your business, we’ll talk payment later”), the agreement may not be enforceable at law.
If there are key points left unresolved or agreed to “sort out later”, a court might find that there was no binding contract at all.
Agreements Not Meant to Be Legally Binding
If one or both parties did not intend for their verbal agreement to carry legal consequences (for example, it was a non-binding “gentleman’s agreement” or between friends/family, without business intention), the law may not find a contract exists.
What About Agreements by Text or Email?
One of the most common questions we get is: “Is a text message legally binding in Australia?”
The answer is: often, yes. If the messages exchanged by text (SMS, WhatsApp, email, or even direct message on social media) include all the essential contract elements - offer, acceptance, consideration, intention, and certainty - those messages can form a legally binding agreement.
For example, if a supplier texts you: “Can deliver 100 units by Friday at agreed rate, confirm if you want to go ahead”, and you reply “Confirmed”, you may well have made a binding contract via text.
It's worth noting that electronic communications can create enforceable agreements, and Australian law (including the Electronic Transactions Act) recognises a wide range of digital communications as capable of forming contracts.
Tips With Text & Email Contracts
- Check your words: Even casual replies can lock you into an agreement.
- If you’re negotiating but don’t want to be bound yet, say so explicitly (“subject to contract” or “pending written confirmation”).
- Keep records of important business communications (screenshots, emails saved) as evidence of what was agreed.
Proving a Verbal Agreement: What Happens in Disputes?
The biggest challenge with verbal agreements is evidence. When there’s a dispute - for example, the other party denies the terms, or claims something different was agreed - how can you prove what was actually said?
In legal disputes about verbal agreements (also called “verbal agreement cases” in Australia), courts rely on:
- Witnesses who were present at the time (hearing the agreement made)
- Contemporaneous notes or records (e.g., a diary note you made right after)
- Other supporting evidence - emails, texts, invoices, or general business practice
Often, it comes down to your word against theirs - and that’s a risky place to be.
Even if a verbal contract is technically valid, it’s much harder (and more costly) to prove compared to a well-drafted written contract. That’s why having your agreements in writing is one of the best ways to safeguard your business.
What Legal Risks Come With Relying on Verbal Contracts?
There are several risks if you base your business dealings mainly on verbal contracts in Australia:
- Disputes about what was agreed: Memory can fade or differ, leading to conflict.
- Lack of evidence: If challenged, it can be almost impossible to prove the terms.
- Unenforceable agreements: Some deals must be in writing to be legally binding.
- Gaps in agreement: It’s easy to overlook important terms (like payment dates, how disputes are resolved, or what happens if something goes wrong).
- Business reputation: Broken promises can damage relationships - and your reputation - if misunderstandings arise.
Written contracts aren’t only about protecting yourself legally - they also provide clarity and certainty for both sides, reducing the chance of disagreements and giving peace of mind.
Verbal Agreement Cases in Australia: What Do The Courts Say?
Australian courts have regularly upheld verbal contracts - but only where there is enough evidence of the agreement’s existence, certainty, and terms. Here are a few examples:
-
Business Partnership Disputes: Sometimes, two people run a business together without formal paperwork. Later, if one claims there was a partnership and the other denies it, courts look for evidence of their spoken agreement plus actual conduct to decide whether a binding partnership existed.
-
Employee Promises: In some cases, a verbal promise of a job, pay rise, or commission has been accepted as binding if the essential elements were met - but only if clear evidence supported what was promised.
-
Family or Social Settings: Courts are generally much less likely to enforce verbal agreements made between family members or friends unless it’s clear both parties intended it to be legally binding and not just a social understanding.
The bottom line? While some verbal contracts are enforced, you’re far less protected if it comes to a dispute. If it matters to your business, put it in writing.
How Can You Make Your Verbal Agreements Stronger?
If, for practical reasons, you need to rely on a verbal agreement (say, time is tight or trust is high), here are steps to help protect yourself:
- Summarise in Writing: After reaching a verbal deal, send a follow-up email or text recapping what was agreed. (“To confirm our phone conversation, you’ll supply 100 widgets at $5 each, delivery by 1 May.”)
- Get Confirmation: Ask the other party to reply or acknowledge the summary - even a “yes, agreed” reply strengthens your position.
- Keep Records: Save all communications, payment receipts, and diary notes. The more supporting evidence, the better.
- Move to a Written Contract: For anything significant (money, risk, important relationships), always follow up with a proper written contract drafted for your business needs.
What Legal Documents Will I Need for Business Agreements?
To truly protect your business and minimise disputes, having the right legal documents is essential. Here are some essentials to consider:
It’s not always obvious which documents your business needs, so it’s wise to speak with a legal expert early in your journey.
How Can You Avoid Disputes Over Verbal Contracts?
While verbal contracts can work in simple, low-risk situations, best practice is always to:
- Put important agreements in writing - it’s clearer, more professional, and easier to enforce
- Be specific and detailed in all business deals (dates, obligations, payment terms, delivery details)
- Confirm every conversation with a written summary (“just to recap, this is what we agreed…”) and get confirmation in reply
- Update written agreements if terms change, rather than relying on ad hoc oral variations
- Use well-drafted contracts for anything financially or operationally significant
Key Takeaways on Verbal Agreement Law Australia
- Verbal agreements can be legally binding in Australia if the key elements of a contract are present - but proving them is difficult.
- Some contracts must be in writing (e.g., property or credit agreements), so relying on a verbal deal in these cases will not protect your rights.
- Text messages and emails can form legally binding agreements if they meet the contract law requirements.
- Verbal contracts carry significant legal and practical risks - especially around proving the terms and intentions if a dispute arises.
- Written contracts and proper documentation provide clarity, minimise disputes, and protect your business - especially for important or ongoing deals.
- Always follow up verbal agreements with written confirmation, and seek legal advice if the stakes are high or you’re uncertain about your obligations.
If you’d like a consultation on drafting contracts or reviewing a business agreement - verbal or written - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
