The Bane of Verbal Contracts

What are verbal contracts?

Verbal contracts are verbal agreements to enter into a contract between two parties following an offer, and subsequent agreement to terms of offer.

There is often a little confusion surrounding verbal contracts – some people believe them to be legally binding, others are convinced that they are not. In the UK they are generally considered to be legally binding, depending on the evidence that is provided to prove the agreement took place in the first place.

This is not necessarily a bad thing – as it protects individuals and businesses from people reneging on an agreed deal. However, as with most things in life, there are people who take advantage of this honour system. Through questionable methods, they will specifically target vulnerable people and businesses and trick them into agreeing to a legally binding contract.

Do verbal contracts hold up in court?

Generally – yes. There may be difficulty in proving the terms of the contract from either side, as the nature of the agreement makes it incredibly difficult for the client to find evidence. The broker or supplier should have a recording of the call, but there are times when the recordings are lost, and it is not unknown for unscrupulous agents to edit recordings before submitting them to suppliers/

If at any point you are concerned that you have accidentally agreed to a verbal contract, or at risk of being held to something you did not agree to – seek legal advice. The sooner you get ahead and seek legal advice improves your chances dramatically of challenging the contract.

What is needed to form a verbal contract?

There are only four elements that are needed in order to form a verbal contract between two parties:

  • There needs to be an offer
  • There needs to be an acceptance of the offer
  • Consideration (something of value must be provided)
  • An intention to follow-up and create legal relations

That’s it. Only four things are needed in order for you to create a legally binding contract either over the phone or in person. Scary, right?

But who actually goes out of their way to secure dodgy verbal contracts? Surely this type of activity must be cracked down upon in the UK, and can’t be common-place

Verbal contracts and the energy sector

The problem of shady verbal contracts is rife within the energy sector. Ofgem still allows for contracts to be secured verbally for energy services, and do not insist on the whole call being recorded – only the scripted interaction between the seller and buyer. That means that only a very small part of your conversation is legally bound to be recorded, and the rest of the conversation is fair-game for deception, white-lies, and flat-out fraud.

If you would like to see what an example script for selling gas and energy looks like – we have included a link to the Gazprom approved ‘verbal script’ that is used to broker deals over the phone. Gazprom are one of the biggest suppliers in the UK – so this is a widespread problem that is not limited to a few operators.

Gazprom Verbal Script

A widely used tactic is to oversell in the pre-script conversation. Either this is through using artificially low consumption to generate favourable numbers, glossing over additional charges, or just being disingenuous about the nature of the contract itself.

Even if a contract is not mis-sold – and the parties involved were fully aware of the terms presented before agreeing – there are still grounds for concern. Often lower-level employees will agree to terms and conditions for business energy provision only to find out later that it wasn’t a good deal. Unfortunately, this is still enforceable.

How much money do you stand to lose from underhand verbal contracts? It depends on what you sign up for – but it is likely to be in the hundreds for domestic customers, and thousands for business customers. There is no limit to who is at risk from this malpractice – a Galloway chocolate factory managed to claim £25,000 back from an energy deal that was deemed to have been mis-sold. Suspicions were initially raised upon receiving the first monthly bill, and following a legal battle managed to reclaim their money. Source: Daily Record

How to protect against verbal contracts?

Register for do not call listIf you can’t be called in the first place, you can’t be tricked into a verbal contract. Also, if you are still called following this action – then the cold callers are breaking the rules and the contract will not stand up in court.
Do not engage with cold callersCold callers don’t call for your benefit, they call for their own. Remember this. You do not owe them the time of your day to hear their offer.
Do not commit to anything over the phoneNever commit to anything over the phone. It is simply just grounds for disaster.
Take great offers with a pinch of salt If an offer sounds too good to be true, it probably is. Request for a written proposal before agreeing to anything.
Stick to written contractsThe terms of these are objective, and you can ask somebody else to look over them.
Record calls if possibleObviously, it is not normal to record all of your phone calls. But if you know someone is trying to get you to agree to something, it may be worthwhile recording from your perspective.

What about Niccolo Gas?

At Niccolo Gas, our customers are the most important thing to us. We do not see the point in enforcing dodgy verbal contracts, and tricking people into signing up to our services.

We are confident that the quality of our service, outstanding customer care, and brilliant products will speak for themselves. We believe in providing clarity for all in the energy sector – which is why we are getting rid of all verbal contracts.

We don’t need to do this. But we strongly believe that by banning verbal contracts we are taking another step towards offering the fairest gas provider in the UK.