Yes, you can take legal action against a customer for non-payment even though there is no written contract. But in absence of a written contract, the challenge is to prove that a legally binding contract existed between the parties.
A contract is an agreement between two or more parties. It is formed when offer, acceptance, consideration, and an intention to be legally bound with legal capacity are present. While a written contract is common, a contract can also be oral or implied.
The requirements of a valid oral contract are exactly the same as any other written contract. Here is a summary of the requirements and how they may apply to your business transaction.
- Offer
Firstly, there has to be an offer. An offer may be in the form of contacting you to place an order for goods provided by your business or to organise your business to perform a service for the consumer. Or, it could be something as simple as clicking the ‘add to basket’ on your website.
- Acceptance
Next, there needs to be acceptance of the offer. This could be the customer agreeing to your quote for the delivery of goods/services by your business.
- Consideration
There needs to be a consideration. In this context, it is usually in monetary form (payment). The promise to make a payment in exchange for goods/services delivered is sufficient.
- Intention
If both parties (customer and business) understand what the ‘contract’ means, they intend to be legally bound by the contract. While this is harder to show without a written contract, in the context of commercial or business relations, there is a presumption that there is an intention to be legally bound.
- Legal Capacity
The customer has to be legally capable of making a contract. For instance, usually, if they are under 18 or have mental health issues, they may be deemed to not have the legal capacity to enter into a legally binding contract.
Conclusion
While it is more difficult to show there is a valid oral contract compared to a written contract, you are able to sue for non-payment but you need to provide supporting evidence to show there is an existence of a contract.
Proofs could include:
- A credible witness to the agreement
- Physical evidence related to the oral contract such as email records, letters, memos, receipts
- An end result from the provided goods and services
An oral agreement will likely be found if it involves two parties that often conduct business with each other, especially if oral agreements are made frequently.
Basically, after all requirements of a contract are met, the court will examine the evidence you provide. The best way you can protect yourself in the future is to have proof that backs up your claim that an oral agreement is made.
Key Takeaways
- You can claim payment for a customer if you have delivered goods/services, even without a written contract
- This is because there is still a valid verbal contract made between the customer and the business
- The valid elements of a contract are satisfied in a business context, similarly to any other written contract. But it is important to have evidence to support your claim for a verbal contract