Are Verbal Agreements Legally Binding in Australia & Do They Hold Up in Court

In a busy office, two colleagues shake on a deal without a written contract, sparking a common question: Is that handshake deal really binding? The short answer is… yes and no, depending on the details and the law. In Australia, verbal agreements can be legally binding; however, proving their terms in court can be challenging.

If you’re navigating a real-life situation, remember: key terms, clear offer and acceptance, consideration, and intention to create legal relations matter, even when nothing is written. 

Let’s take a closer look at the legal details and repercussions of verbal contracts in Australia. 

Understanding verbal agreements in Australia

Put simply, a verbal agreement is any type of agreement created through verbal communication. So, it’s quite literally — a deal made verbally. 

Many people symbolise that a verbal agreement is present by shaking hands or saying “we’ve got an agreement”, but it’s not really necessary.

In reality, we enter into verbal agreements every day without even realising it.

When you order food at a restaurant, you’re entering into a verbal agreement to pay for that food. When you hire a plumber or a landscaper to do some work on your house, you’re entering into a verbal agreement to pay them for their professional services. 

But what happens when you break a verbal agreement? Are verbal agreements enforceable? That all depends on whether it was legally binding to start with. 

Whether or not verbal agreements are legally binding in Australia

In short, a verbal agreement is a type of contract that can be legally binding. However, it’s essential to recognise that not all verbal agreements will be. 

In fact, it’s the same for written agreements. Some written agreements will be legally binding, while others will not. It all depends on the substance or contents of the agreement itself and whether or not the elements of a contract are present.

Therefore, whether your agreement is verbal or written, if it contains all the elements of a binding contract, then it’ll be binding.

So, what are these elements? Find out below.

5 key elements of a legally-binding agreement 

Under Australian contract law, the following five elements of a verbal contract make the agreement legally binding. 

1. Offer and acceptance

Offer and acceptance are the first elements that must be present to prove any agreement, verbal or written, is legally binding.

Firstly, there needs to be some ‘offer’, and it’s the whole reason why the agreement exists in the first place. If you have an agreement to buy a TV, the offer is ownership of the TV. If you agreed to sell your property, the offer is for ownership of your property. 

Secondly, there needs to be a clear ‘acceptance’ of the agreed-upon offer. 

Acceptance occurs when a party agrees to comply with the terms of the contract. In verbal agreements, acceptance is usually expressed through words like “I agree” or “you’ve got a deal.”

But, acceptance can also be non-verbal or implied through actions, such as a handshake or simply beginning to act out the agreed-upon terms. 

Why are offer and acceptance such an important element? Well, it shows that both parties have had a ‘meeting of the minds’, which essentially means they have reached a basic agreement. 

2. Consideration

This is one of the most important elements in creating a binding contract. In fact, without consideration, agreements will not be legally binding at all. So, it either makes or breaks the legality of a contract.

‘Consideration’ is the value given in exchange for the agreement being carried out. So, it’s essentially the price you’ve paid for the contract to come to life. 

Generally, the payment of money will constitute sufficient consideration. But money isn’t the only form of acceptable consideration. For instance, you may give the other party a piece of jewellery as consideration for the agreement. 

So long as the object or money has value, it can be the ‘price’ or consideration of the contract.

Just remember, a verbal or written agreement cannot be legally binding if consideration isn’t present. 

3. Intention to create legal relations

For any agreement to be legally binding, there must be an intention to create a legal relationship. 

How do you show this? 

The answer is, for written agreements, the courts will look to the agreement itself and the conduct of the parties. Typically, written agreements will expressly state whether there is an intention to create legal relations. 

However, as verbal agreements lack a written document to refer to, the courts will examine the conduct and behaviour of the parties, as well as the setting in which the agreement was made.

In a commercial or business setting, there is generally no problem proving this element, as a commercial setting supports the idea that commercial parties usually intend to create legally binding relationships.

However, what happens if you’re discussing business while having a few beers at a pub and you enter into a verbal business agreement? 

Well, the circumstances behind the making of this agreement, i.e., drinking at a pub, can stand as solid evidence against an intention to create legal relations. This means that if the setting in which the agreement was made is too informal and social, it will not be considered ideal for creating legally binding relations. Such an informal setting can consequently undermine the intention to create legal relations.

Even if all the other elements for creating a legally binding agreement are present, a lack of intention to create legal relations can render the entire agreement invalid. 

4. Certainty of terms

This is another important element that’s a necessity in creating a legally binding agreement. 

‘Certainty’ refers to the fact that the terms of the agreement must be clear and cannot be vague, as all parties must know what their agreed-upon responsibilities are.

For written agreements, it’s usually straightforward to determine whether the agreement document is certain or not, as everything will be explicitly stated and explained. 

However, verbal agreements are a different story. As verbal agreements only rely on what each party represents them to be, it’s almost like a ‘she said, he said‘ type of situation. Therefore, it can be challenging to determine the actual terms of the agreement. 

Of course, if either party disagrees as to what the terms of the verbal agreement were, then the agreement cannot be seen as ‘certain’ from a legal perspective. 

If you do make a verbal agreement with someone, take extra care to ensure you both understand any specific terms of the agreement. In other words, make sure you’re both on the same page.

5. Legal capacity

Any agreement you make must be with people or businesses who have the capacity to enter into a legally binding contract.

‘Capacity’ is simply the legal ability to enter into a binding agreement. If an agreement is made with someone who lacks the necessary capacity, then that agreement will be void.

Most individuals will have the correct capacity to enter binding agreements. However, there are a select few individuals who don’t. 

Accordingly, the following individuals lack legal capacity:

• Minors under 18 years of age
• Individuals with a mental disability
• Intoxicated individuals
• Individuals who are bankrupt

When a verbal agreement is NOT binding

If the above five elements are not present, then a verbal agreement is not binding. Additionally, there are several exceptions and limitations when it comes to the types of contracts that can use verbal agreements. 

The following transactions require a written agreement: 

• Land or property sales: Any agreement for the sale or transfer of real estate typically must be in writing to be enforceable under Australian law.
• Consumer credit agreements: Certain credit arrangements with consumers require written documentation.
• Guarantees: Promises to guarantee another’s debt or obligations generally require writing to be enforceable.
• Contracts over 1 year: Agreements that cannot be fully performed within one year from the date of formation often must be in writing to be enforceable.

State-specific nuances matter. For instance, land transfers, consumer credit, and guarantees have tailored rules across NSW, Victoria, Queensland, WA, and other jurisdictions. These differences can affect not only whether a contract must be in writing, but also what constitutes acceptable evidence of terms and intent to create legal relations.

Additionally, in Australia, these categories trigger a Statute of Frauds-like rule: even if an oral agreement exists, it may not be enforceable unless reduced to writing that meets the applicable statutory framework. 

The practical effect is that verbal terms in these areas are risky: essential terms, payment mechanics, and the expected performance timeline can be difficult to prove without a written document. 

If any of the above apply, prioritise a formal written contract or a written amendment that satisfies state-specific requirements.

Practical examples of verbal agreements in Australia

Let’s look at how verbal agreements might look in practice. We will also discuss what can go wrong. 

Phone agreement with a supplier

A purchasing manager verbally confirmed a supplier’s delivery terms and pricing over a phone call, but no written contract or purchase order was issued. When the supplier later claimed higher prices and changed delivery terms, the business argued there was no binding written agreement.

What went wrong: Essential terms (price, quantity, delivery schedule, and acceptance) were not reduced to writing, making it hard to prove the exact terms and evidence of intent in court.

Courts scrutinise the existence and terms of oral agreements, and reliance on memory or informal notes can be insufficient to establish a binding contract.

Casual employment arrangement

An employer and a worker discussed hours, pay, and duties verbally and began work immediately. After several weeks, the worker disputed entitlements, arguing there was a binding employment contract.

What went wrong: Absence of written terms led to disputes over pay rates, hours, and employment status. Without a written contract, terms can be ambiguous, making enforcement difficult.

Courts attend to the parties’ conduct and what was agreed, but certainty of essential terms is key; a lack of written terms often undermines enforceability.

Service agreement via text

A client and contractor agreed to a project scope and milestones via a string of text messages. Work commenced, but disputes arose about scope, payment, and acceptance criteria.

What went wrong: Text-based exchanges may illustrate intent but rarely capture all essential terms or remedies for breach. Without a formal service agreement, remedies can be limited or contested.

While a written format is preferable to a verbal one, it is still possible to contest clear evidence of an offer, acceptance, consideration, and intention in oral or semi-written agreements. 

Business partnership discussion

Founders had several discussions about roles, capital contributions, and profit sharing, but no formal partnership agreement. After operations began, disagreements about equity and decision-making emerged.

What went wrong: Critical terms such as ownership percentages, governance, and exit provisions were not documented, leading to disputes and expensive legal resolutions.

Courts look for a clear intention to create legal relations and a concrete outline of terms; lacking a written framework makes enforcement and dispute resolution far more complex.

Ultimately, even when verbal agreements exist, the absence of written terms often complicates proof of offer, acceptance, consideration, and the intention to create legal relations.

For high-stakes or long-term arrangements, document critical terms in a formal written agreement or have written amendments reflecting any updates.

How to prove a verbal agreement in court

If you’re trying to prove you have a legally binding verbal agreement, you’ll likely need to give oral evidence or a witness testimony in court. You’ll have to explain the details of when the agreement was made, what was said, where you were, etc.

However, even this is not generally sufficient to prove you had a verbal agreement. It’s basically one person’s word against the others. So, think about any evidence you may have to support the fact that there was an agreement in place.

Maybe you have text messages, emails, purchase orders, or you’ve made a payment to the other party for consideration. Do you have a witness who can attest to knowing that an agreement exists?

You should use any evidence you can muster up to prove you had an agreement in place. Of course, this can be challenging and time-consuming to gather, but it will ultimately benefit you in the long run.

Protect yourself with thorough documentation (even without a written agreement)

In business and personal arrangements, having solid written documentation protects both sides. If you rely on verbal agreements, supplement them with clear records to reduce disputes and strengthen any later enforcement.

Documentation you should have

• Follow-up emails: Provide a clear recap of terms, confirmations, and next steps via an email confirmation for your verbal agreement.
• Text message confirmations: Retain a concise written record of scope, price, timelines, and acceptance.
• Witness statements: Obtain written notes from people present, including dates and what was said or agreed.
• Recording conversations (with legal warnings): Where lawful and with consent, recordings can capture exact terms and positions.

Here is what your follow-up e-mails might include: 

• Basic terms recap
  Subject: Confirmation of Terms for [Project/Deal] on [Date]
  Hi [Name], as discussed on [date], we agreed on the following terms: [Term 1], [Term 2], and [Term 3]. Please reply “Confirmed” or note any corrections.
• Project scope and milestones
  Subject: [Project] Scope Confirmation
  Hello [Name], confirming the project scope: deliverables [A, B], milestones [X, Y], deadline [date], payment [terms]. If accurate, please reply with “Confirmed.”

Red flags to watch for:

• Vague, shifting, or undefined terms (price, scope, deadlines, deliverables).
• No written summary or written confirmation after discussions.
• Absence of an explicit acceptance mechanism or governing law.
• Parties begin performance without any documented agreement or amendment.
• Reliance on memory or informal notes rather than verifiable written records.

While strong interpersonal relationships are key in business, it’s important to protect your interests in case things don’t go to plan. 

What to do if someone breaches a verbal agreement

What happens if a party breaches a verbal agreement? Here are the key steps to follow: 

1. Gather available evidence (emails, texts, witness accounts, records of performance). 
2. Attempt a written reconciliation or demand letter outlining the breach and proposed remedies. 
3. Seek to mediate informally, then consider formal remedies such as damages, specific performance, or rescission if the breach is material. 

For high-stakes deals, consult a contract lawyer early to assess enforceability and potential remedies under verbal contract law in Australia. 

Remember that proving a verbal agreement in court hinges on clear evidence of terms, the existence of an agreement, and the intent to create legal relations.

How to convert verbal agreements to written (checklist)

• Start with a concise, written summary of the key terms (who, what, when, price, delivery, and acceptance). 
• Follow up with a formal contract or written amendment, and obtain signatures or explicit written confirmation. 
• Use email or a shared document to capture terms and changes, and attach relevant documents (quotes, specs, schedules). 
• Preserve evidence of performance and communications as corroborating material. 
• If in doubt, involve a lawyer to draft a simple written agreement that satisfies relevant state laws and any industry standards.

Industry-specific guidance 

Verbal agreements are common across many Australian industries, but their enforceability depends on context, terms, and applicable legislation. 

Construction/trades

In the construction and trades industry, verbal arrangements (with suppliers, subcontractors, or service providers) often occur on-site. To avoid issues later on, you should: 

• Document scope, price, timelines, and change orders in a written summary
• Insist on written confirmations for any deviation from baseline terms
• Align practice with the Fair Work Act and consumer protection provisions where applicable

Ensure that contractor licenses and insurance are in place, and maintain contemporaneous records of all communications and approvals. If disputes arise, rely on written evidence, such as emails and inspection reports, to support the terms and obligations.

Freelancers/consultants

Freelancers often rely on verbal briefs and milestone agreements. To protect yourself, make sure to: 

• Capture deliverables, timelines, payment terms, and acceptance criteria in a follow-up email or formal contract
• Use written confirmations for scope changes
• Maintain records of invoices and client communications. 

Under the Fair Work Act and Australian consumer laws, clarify employment status and ensure compliance with minimum standards and applicable tax obligations. Record agreements promptly to support their enforceability in the event of disputes.

Small business suppliers

For supplier arrangements, make sure that you: 

• Document purchase terms, delivery dates, and pricing in a written briefing or purchase order
• Confirm terms via email or a formal quote. 
• Obtain written acceptance of terms before major orders
• Maintain a log of communications and changes

You must comply with ACL requirements for consumer transactions and ensure transparent dispute resolution mechanisms at all times.

Employment situations

Verbal employment contracts can form a binding contract, but are risky without written records. It is best to: 

• Provide a written offer and employment contract detailing duties, hours, pay, entitlements, and notices
• Confirm any changes in writing
• Maintain a paper trail of performance reviews and pay records. 

Under the Fair Work Act, ensure compliance with minimum entitlements and clarify genuine employment status to avoid misclassification.

Across these sectors, the safest approach is to convert key verbal terms into written documents and confirmations. When verbal agreements exist, supplemented with clear follow-ups, written change notices, and robust record-keeping to support proof of terms and intent, should disputes arise. 

Verbal agreement vs written contract: key differences

Verbal agreements and written contracts sit on a spectrum of legal enforceability. Both can be legally binding, but they differ in terms of clarity, enforceability, and the evidence required to prove the terms in court. 

The comparison below highlights key aspects to help you decide which form to use in common Australian scenarios.

Aspect	Verbal Agreements	Written Contracts
Practical advantages	Quick, flexible, low upfront drafting costs; suitable for simple or interim arrangements.	Clear terms, detailed obligations, defined timelines, and easier enforcement; strong evidentiary support.
Common disadvantages	Terms can be misremembered or disputed; proving existence and exact terms in court is difficult; higher risk of ambiguity.	Requires time and effort to draft; potential for over-formality; higher initial cost.
Legal enforceability (Australia)	Can be legally binding if the elements of a contract are proven (offer, acceptance, consideration, and intention to create legal relations). Yet certain high-stakes or long-term deals may still require writing.	Generally, the strongest form of enforceability due to explicit terms and direct evidence of agreement; writing may be required for certain contract types under statute.
Evidence requirements	Depends on memory, witnesses, and surrounding conduct; corroboration is often essential.	The contract itself serves as primary evidence; emails, drafts, amendments, and related documents reinforce terms.
Statutory writing requirements	Some categories (e.g., certain land transfers, guarantees, or long-term arrangements) may be required to be in writing under Australian law.	Writing helps satisfy statutory requirements and reduces the risk of unenforceability in regulated contexts.
When to choose	If speed is essential, terms are simple, and risk is low.	For anything high-stakes, long-term, complex, or regulated, where certainty and enforceability matter most.

When to seek legal advice

Unconvinced that a verbal agreement is enough? It’s best to seek legal advice early for high-stakes or complex agreements, or when significant funds, long timelines, or regulated terms are involved. 

A solicitor can review drafts, assess evidence for verbal agreements, and plan dispute resolution or enforcement strategy. For a ballpark estimate, plan for an hourly rate between AUD 250 and AUD 650. In case you are disputing a verbal agreement, you’ll also need to consider potential court fees. 

Lawpath provides prepaid legal advice plans and on-demand reviews, offering transparent pricing to help you decide whether to engage specialist help. Get in touch with Lawpath today!

FAQs

Can I sue based on a verbal agreement?

Yes, you can take action against a party that fails to live up to a legally binding agreement, including a verbal agreement. 

However, as mentioned above, you should ensure that all the elements of a legally binding contract are first present. If they aren’t, you may not be able to take action against the breach of your verbal agreement.

Do I need a witness for a verbal agreement?

Not always. A witness can help prove that an agreement existed and what terms were discussed; however, many verbal contracts are enforceable without one if the essential elements (offer, acceptance, consideration, and intention to create legal relations) are established.

 State-specific rules and the type of agreement can influence whether a witness is required.

Can I change my mind after a verbal agreement has been made?

Yes, but changing your mind can create breach risks if the other party has relied on the agreement in good faith. To minimise disputes, communicate changes in writing and confirm them with the other party, ideally via email or a formal amendment.

Can you pull out of a verbal agreement? 

Breaching a verbal agreement can expose you to damages or other remedies, especially if there’s evidence of a binding contract and reliance on its terms. If a potential breach is likely, seek legal advice to assess remedies, possible defences, and whether a written agreement or amendment is needed.

Is a text message legally binding in Australia?

Text messages can form part of a binding agreement if they include all essential terms and show an intention to be bound. However, proving the terms and existence of a contract from text alone can be challenging. Where possible, capture terms in a formal written contract and obtain signatures or written confirmation.

A written agreement is always best

In an ideal world, most transactions and agreements will be in writing. Generally, the larger and more complex the circumstances, the more likely you are to benefit from having a contract in writing. 

A written agreement has significantly less difficulty in proving its legally binding nature. 

If you require a written agreement, browse our extensive library of legal documents, which includes hundreds of templates and agreements. You won’t have to worry about spending hours drafting up your agreement; our agreements can be customised in a matter of minutes!