He said, she said...what?!
If there is one piece of advice that every lawyer agrees on it is this: "Put it in writing".
But have you ever wondered why? What harm is there if you just verbally agree? We're all friends after all...right?
The recent case of Arcaba v K & K Real Estate* illustrates perfectly why you need to document your legal arrangements, particularly when lending large sums of money.
In this New South Wales Supreme Court case, Milorad Arcaba alleged that K & K Real Estate breached an oral contract made in late November 2010. The agreement supposedly included the following terms:
- Mr Arcaba would not seek immediate repayment of monies he had lent to K & K Real Estate; and
- In return, K & K Real Estate would pay Mr Arcaba an additional $1.6 million from the sale of properties within a development.
Mr Arcaba argued that the parties entered into the alleged agreement throughout the course of verbal negotiations.
K & K Real Estate denied that such an agreement ever existed.
Justice Hall noted that as Mr Arcaba was the party alleging an oral contract had formed, he had to prove what was said within the negotiations, not K & K Real Estate.
Justice Hall cited a previous case, Watson v Foxman**, where Justice McClelland said:
“Human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene.”
Due to inconsistencies in Mr Arcaba’s recollection of his discussions with K & K Real Estate throughout cross-examination, Justice Hall determined that Mr Arcaba had fabricated his claim and found in favour of K & K Real Estate.
The case highlights the importance of ensuring that all verbal agreements are subsequently reduced to writing. Had Mr Arcaba put his alleged agreement with K & K Real Estate in writing, he would not have had to rely on his memory of their conversations to prove a contract had formed.
Written agreements are not only more certain and reduce the chance of dispute, but are more likely to be found binding and enforceable by the courts.
At the very least, written notes or minutes of telephone or face-to-face negotiations should be recorded and kept so that they may be relied on as evidence, if necessary.
If you are in dispute over a verbal agreement, please do not hesitate to contact our Litigation + Dispute Resolution team who can help clarify the agreement’s terms, advise whether an oral contract has formed and assist you protect your rights in the dispute.
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