Have you ever sealed a deal with a simple handshake? Maybe you agreed to lend a friend some money, promised to do a small job for someone, or had a business conversation that ended with a confident nod instead of paperwork. It’s a common situation, and it brings up an important question: Is a verbal contract legally binding? In theory, yes, some verbal agreements are legally binding. However, the challenge comes in trying to prove them.

Whether you’re a small business owner, a contractor, or just someone trying to keep things fair in a personal arrangement, knowing your rights when it comes to spoken promises matters. Verbal agreements are part of everyday life, but when things don’t go as planned, it helps to understand if those spoken words carry as much legal weight as a written agreement.

When a Verbal Agreement is Legally Binding

Verbal contracts are generally binding in Canada, provided they include typical contract elements. However, proof can be challenging without documentation or witness testimony, and some contracts need to be in writing, such as those for land, guarantees, and significant goods transactions, often due to the Statute of Frauds. Parties to a verbal agreement should be aware of these legal challenges and consider creating some form of written evidence or record to make it easier to enforce if legal disputes arise.

Legally Binding Verbal Agreements in Canada

Aside from the special cases, a verbal agreement must contain all the elements of a valid contract for a court to enforce it. These key elements include:

     
• Offer and Acceptance: One party must make a clear offer, and the other must accept that offer on the same terms. There must be a mutual agreement or “meeting of the minds” on the essential terms. A simple verbal exchange can satisfy offer and acceptance as long as it’s clear that both parties assented to the deal.
     
• Consideration: A contract must involve an exchange of value for it to be legally valid. This means that each party must give or promise something of value. For example, payment in return for goods or services. Even a very small amount of value can suffice, but a one-sided promise without anything given in return is not enforceable.
     
• Certainty of Terms: The agreement’s terms must be sufficiently definite and clear. Important points like price, scope of work, duration, etc., should be settled. If the terms are too vague or key terms are left “to be agreed later,” the contract may fail for uncertainty. Courts will look at the parties’ intentions and the surrounding circumstances to interpret terms, but they won’t create a contract on behalf of the parties involved.
     
• Intention to Create Legal Relations: The parties involved must have intended the agreement to be a legally binding​ contract. In a commercial or business context, this intention is usually presumed. In a family or social context, the presumption is usually that it was not meant to be legally enforceable unless clearly indicated otherwise.
     
• Capacity and Legality: Although often taken for granted, each party must have the legal capacity to enter into a verbal or written contract, and the agreement’s purpose must be lawful. An otherwise valid verbal contract is not enforceable if one party lacked capacity or if it involves illegal subject matter.

For more information on what makes an agreement legally binding, read our article here.

If all these elements are present and no specific writing requirement applies, an oral agreement can be just as valid as a written contract under Alberta law. So then, the challenge lies not in the legal theory but in enforcing verbal contracts. Individuals or their contract lawyers will have to demonstrate to a court that these elements existed in a verbal exchange.

Understanding Which Verbal Contracts Aren’t Enforceable Under Alberta Law

Alberta’s law, which is largely inherited from the historic Statute of Frauds, mandates that some types of contracts must be evidenced in writing to be enforceable in court. If a verbal contract falls into one of these categories without a formal written contract, a court will generally refuse to enforce it.

These categories, which required a written agreement, are as follows:

     
• Contracts for the sale of land or interests in land: Agreements involving land (such as selling real estate or long-term leases) must be in writing and signed by the party being charged, as required by Alberta’s Statute of Frauds. An oral deal to sell or transfer land is unenforceable without a written contract outlining the deal.
     
• Guarantees of another’s debt: A promise to answer for or guarantee the debt or obligation of someone else must be outlined in a written contract. A verbal contract will not suffice. Alberta’s Guarantees Acknowledgment Act goes even further. It requires that a personal guarantee be signed and formally acknowledged before a lawyer for it to have any effect. A verbal guarantee, such as a friend agreeing to pay a friend’s loan if they default, would not be binding without these formalities.
     
• Contracts not to be performed within one year: If the agreement, by its terms, cannot be fully performed within one year from the date it is made, it generally needs to be in writing to be enforceable​. This rule, originating from the Statute of Frauds, aims to prevent disputes over long-term promises that are difficult to prove after a long time.
     
• Contracts in consideration of marriage: Certain agreements made in the context of marriage must be made in the form of a written contract. Modern prenuptial agreements, cohabitation agreements and marriage contracts in Alberta must be written and meet formal requirements set by statute to be valid.
     
• Sale of goods over a specified value: Under Alberta’s Sale of Goods Act, an oral contract for the sale of goods above a modest value (traditionally $50) is unenforceable unless there is some written documentation of the deal or the buyer has partly accepted or paid for the goods. This means big-ticket sales should have a written agreement or part performance; otherwise, one party can invoke the statute to avoid the oral deal.

These categories illustrate that while most everyday agreements can be made in the form of a verbal contract, provincial legislation requires written documentation for significant transactions. If a verbal agreement falls afoul of these rules, it is not void per se, but it cannot be enforced by the courts.

There are some equitable exceptions, for example, the courts may enforce an oral land contract if there has been substantial partial performance unequivocally referable to the agreement, but such relief is discretionary and case-specific. In practice, for any important matter covered by these rules, a written contract is essential to avoid the unenforceability of a verbal contract.

How to Prove a Verbal Contract

The practical challenge with verbal agreements is proving their existence and terms in court. Unlike a written contract, there’s no document to point to as definitive evidence of what was agreed upon with a verbal agreement.

Enforcing a verbal contract often comes down to a credibility contest, sometimes described as a “he said, she said” scenario. The party seeking enforcement of a verbal contract must convince the judge, on a balance of probabilities, that a binding verbal agreement was indeed made and what its terms were. This can be not easy when memories have faded or if two or more parties recall the conversation differently. As a result, many otherwise valid verbal contracts fail in court due to a lack of sufficient evidence rather than a lack of legal validity.

To overcome this hurdle, litigation lawyers and courts look to any available evidence to support their claim beyond just the parties’ oral testimony. Common forms of supporting evidence for a verbal agreement include:

     
• Witness Testimony: If a third party overheard the verbal contract being made or later discussions about the deal, their testimony can corroborate one side’s version of events.
     
• Written Communications: Even if the main contract was oral, people often discuss or confirm aspects of the deal in writing before or after. Emails, text messages, letters, or even handwritten notes can serve as evidence and a written record of the contract’s terms or the fact that a legally binding agreement was reached​. For instance, an email saying “Just to confirm our deal, I’ll do X and you’ll pay Y” is powerful evidence of a verbal contract on those terms.
     
• Partial Performance: Actions taken by the parties that are consistent with the verbal contract can imply that a contract existed. Payment of a deposit, beginning the work, or delivering part of the goods, or any performance that only makes sense if a contract was in place, will support enforcement. Alberta courts may consider the doctrine of part performance in certain cases (especially land agreements) to enforce a handshake agreement that has been partly acted upon, as a way to prevent injustice.
     
• Receipts and Financial Records: Bank statements, receipts, or invoices showing that one party paid the other or expended money in reliance on the agreement can help verify that a verbal contract was in effect​.

Using such evidence, the courts will piece together the broader circumstances, contractual terms, and context of the transaction to determine if a contract existed and what its terms were. The more evidence one can produce aligning with their version of the verbal contract, the more likely a court will be to rule in their favour.

Conversely, if it’s purely one person’s word against another’s with no corroboration, the claimant faces an uphill battle to prove an agreement existed. For this reason, even though verbal agreements are legally binding, it is prudent to document important agreements in writing whenever possible (whether that is employment agreements, personal transactions, informal agreements, or something else). A written contract or at least a written confirmation by an email, can save significant uncertainty and litigation risk down the road.

If you need help enforcing a verbal agreement or are considering putting your contract in writing, we’re here to support you. Whether it’s reviewing terms, drafting a clear agreement, or assessing a potential claim, get in touch with DLegal Law Office today. We’ll help you understand your options and protect your interests.

The content of this article is intended to provide a general guide to the subject matter and should not be considered legal or other professional advice. To get detailed information regarding your specific circumstances, please discuss your situation with a lawyer or other professional. Refer to our Legal Notice Legal Notice for more details.