Can you trust a verbal agreement in business?

- December 15, 2016 2 MIN READ

Picture this. You’re great mates with your landlord for your business space. You catch up for coffee regularly and even enjoy a BBQ with your families every now and then. Great!

However, your lease is due to expire in the next few months, and your premises are looking a little bit tired. Your usually lovely landlord drops by and looks around and says, ‘You know what, I reckon if you spend some decent cash fixing up the place, I’ll look after you at renewal time’.

Wow! What a great landlord. No need to put that in writing because … you’re great mates, remember?

So, off you go – sprucing up the place, putting capital into your landlord’s property.

The time finally comes and your lease is up, but you aren’t worried. You have spent plenty of time and money making the property look amazing. Your lease will be renewed. After all, your landlord made you a promise that he has to keep. It is a verbal agreement. Right?


Just this year, the High Court looked at a case exactly like this. The High Court said even though the tenant only spent the money on a new fit-out because of a ‘promise’ they said the landlord made, the tenant couldn’t hold the landlord to it. The High Court said that the tenant and the landlord had to stick to what was written down in the lease, and couldn’t try to squeeze in ‘promises’ made in conversations.


So, what’s the moral to the story? A verbal agreement is officially worth nothing. Get it in writing. Even if it feels like you might be stretching the friendship. These things are important.

Sometimes I see business owners assume that they are better off with their ‘wink and handshake’ deals. They think putting their deals down in writing will be impossible because the law is rigid and so are legal documents and a written contract couldn’t possibly reflect the parties’ intentions.

Even things that don’t seem like they would fit into a contract should still make it to the page.

Did you know that UFC owners Lorenzo and Frank Feritta famously wrote a clause into their shareholders agreement that in the event of a boardroom deadlock, they would have a jiu jitsu fight that would be refereed by their friend and UFC President, Dana White?


Ok, I admit it, there’s usually a form and a pattern and terms that need to be in particular deals. But they are there for a reason, and they are there to protect the parties.

A good advisor will put your grand plans and deals into writing in ways that make all parties clear on their rights and obligations, and also to protect you if things don’t go to plan.

Business owners know that deals get done in all sorts of ways. That’s ok – keep doing your deals, just get them in writing!

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