The Pitfalls of Verbal Contracts

“Small businesses owners are busy, so they often make agreements for business services on the fly. And since they know what they mean, they believe the person they deal with knows what they mean, so they think it’s okay to have some notes instead of a detailed contract,” says Robert Bernstein, board-certified creditors’ rights and business bankruptcy specialist and partner at Bernstein Law Firm.

An example might be a trash service whose owner verbally agrees to pick up a business’s waste each week for $100, with a $75 charge for each additional pickup. If an invoice is sent to the business owner for a different amount and the terms are stated clearly on the invoice, that becomes the only physical iteration of the agreement, giving the vendor more control of the discussion.

As a general rule of thumb, says Bernstein, “If it’s a contract or deal of significance to you—such as one with an important delivery date or where the amount of money is a lot for your business— you’re probably better off having it in writing, because it’s important enough to worry about.”

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