Verbal contracts aren’t contracts – or are they?

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A fairly common notion is that ‘verbal contracts are not valid contracts’. Although common, many will be surprised to know this statement is actually incorrect. A verbal employment contract or one that is only ‘implied’ can still be legally binding, meaning you could make a job offer without realising it.

In this article, MIA Business Support Helpline, Croner, advises on how to avoid making an implied contract, and explains the differences between implied and written contracts. 

If you make any form of promise relating to the individual’s employment, this refers to an ‘implied’ contract. If you discuss contract details with the individual, such as job duties, work hours, or pay & benefits, then this constitutes an explicit verbal employment contract.

A binding agreement can be formed on the basis of verbal statements or via information from an employee handbook or company policy. This is because a large portion of the details in the employee handbook will be similar to those found in a written employee contract.

How do I avoid making an implied contract?

Avoid making specific promises during the interview stage, or in the job offer letter should you choose to hire the individual. Such promises can include things like:

“We’ll never fire you”

“You’re guaranteed to have a job here for the next 5 years”

But they can also be more subtle, for example:

“Your pay & benefit package will be…”

“When your probationary period finishes…”

These may not seem like promises, but they imply that the individual is going to be employed in the future, and therefore can count as an implied contract.

If you wish to make an offer of employment, but don’t want to guarantee any terms before a written contract is drafted, avoid including promises/terms within the offer letter. It is also helpful to clearly inform the employee of the fact that the relationship between the employer and employee is at-will, meaning the relationship can be ended by either party at any time.

Implied vs Written

The danger of a verbal contract lies in the fact it is very difficult to enforce if things go pear-shaped. Just because an employee doesn’t have a written contract, doesn’t mean they have no terms or rights. You can verbally communicate what parts of the employee contract are legally binding, but they are more difficult to prove than a written contract.

If no terms are set out, either verbally or in writing, employees can expect implied terms, these include:

  • A safe and secure working environment
  • The right to a minimum of 5.6 week’s paid holiday
  • Recurring/standard company benefits (such as an end-of-quarter bonus)

A written agreement can clearly set out what the employee can expect under your employment so there is no grey area. As a matter of security it is advisable to have a written contract, they provide evidence for both parties and can be used as a reference should a dispute arise. A written contract means you can outline your expectations of the employee.

Expert Support

For assistance drafting an employment contract or any other HR/Employment law issue, speak to an employment law expert on the Business Support Helpline included in your MIA membership.

Email alice@mia.org.uk or call 01403 800500 for the exclusive Business Support Helpline scheme number.