Introduction:
Sometimes, people do not take it seriously to transact money with other people. This often happens when they are owed money without a contract or agreement. Most of the time, it happens between friends, family members or close relatives who lend money over a verbal agreement. Good faith plays a critical role in that. Sometimes, people are in a hurry to make a business transaction verbally and don’t think to make a legally binding contract. But what happens if your business transaction is not completed due to non-payment by the other party, and it leads to a dispute over money owed to you? In this situation, the only legal path is open for you to recover your owed money.
The success of legal action will depend heavily on evidence that proves the money is owed. It is true that an oral agreement can be enforced, but there is less chance to satisfied to the court about the transaction. To establish a strong case, you need some physical evidence, such as bank records, electronic messages like SMS, WhatsApp chats, email, telephone records, transaction notes, etc.
Are Verbal Agreements for Money Owed Enforceable?
There is legal validity to a verbal contract under the law. There is no need for every contracts mandatorily made in written form. A verbal contract for money owed is also enforceable by law. But due to the lack of physical evidence, it is difficult to prove the money transaction was actually made between the parties.
Therefore, it is advisable to create a written agreement that specifies the terms and conditions of the financial arrangement, because it becomes a legally binding agreement between the parties. If one party denies the transaction, the second party can enforce the agreement in a court of law.
Essentials of a Valid Contract:
Offer: An offer is made by one party to another.
Acceptance: The other party makes their confirmation of the offer.
Consideration: Consideration means exchange of value. The parties involved provided something of value to each other.
Create Legal Relations: The intention of the parties should be clear and create a legal relation between them. Such as, the agreement that is made between them is legally binding and enforceable by law in case of breaches.
Capacity: The parties should have a legal capacity to enter a legally valid contract.
If all these essentials are met between the parties, even if the agreement is made verbally, it creates legal validity and can be enforced in the event of breach.
Can you file a lawsuit to recover money owed to you?
The answer to this question is yes. But the burden of proof is on you as a plaintiff, and you need to satisfactorily prove in the court that the money claimed is actually due. You need to prove with evidence in the court. In the court procedure, follows certain steps such as:
- File a petition for breach of contract.
- Adduce evidence or lead evidences
- Evidence provided by the defendant
- Final court order
After following these basic procedures, the final verdict on owed money without a contract is decided by the court.
What to do if Owed Money but no Contract?
Owed money without a contract is a difficult task to recover the due. For that, you need to use other sources to prove the debt, such as SMS, telephonic calls, etc. In the absence of a written agreement, there are certain other sources you need to gather evidence that shows the money is due. Some of the sources listed below:
Cheque Bounce:
If the debtor gives a cheque that bounces or is not encashed and returned. It is counted as evidence that the debt is owed by the drawer.
Unpaid Invoices:
It is not unusual for business transaction done without a written and signed contract. Commonly, business transactions use invoices to request payment. A copy of the invoice is provided to the customers and carried with them as proof that sending it to customers. It will help to prove the fact that the debt is owed. Some of case, if you provide a monthly statement of amount, that show how is owed or overdue. It also becomes essential evidence.
Evidence of carrying debts:
In the event of overdue payment, you will definitely contact the party for clearing of the debt via email, SMS, WhatsApp, etc. Any of these can be used to prove a debt owed. Some of case, the other party may reply to you, asking for more time or requesting more time; that admission is very helpful in proving that they really owed.
Friendly Loaned Money without a Contract:
Sometimes you lend money as a loan to your friend or family members; it is called a friendly loan. That type of loan difficult to repay and prove. Because of a lack of proper evidence, you cannot easily prove that the money was given as a loan on terms of repayment in future. Enforcing that type of verbal agreement that the amount is owed depends on higher probably evidence, which shows that the cash was given on terms of a loan with repayments. Such as,
- Evidence of a bank statement showing the money or cheque given to the person’s bank account.
- They failed to repay, like the payment is stopped into your account.
- Your account statements that show the money is not given as a gift.
- Your income tax records that show you cannot able to give someone any amount as a gift.
Witnesses to the Arrangement:
When there is no documentary evidence that shows the money owed, in this situation, an individual witness of a verbal contract plays a significant role in proving a debt. For example, if the money is given to your friend at that time, a person was present there and knows how the verbal contract is done, and when they agreed to repay the loan. If the transaction is related to business, an employee who takes the order on a phone call and he was know the payment terms were verbally agreed by the customer.
Debt Disputes without Contract:
Lack of a written agreement, it should be possible to collect proper evidence to prove that you are owed the money. It will depend on your evidence and how it is put together in court. You need to satisfactorily prove to the court your entitlement to the money owed in the absence of a written contract.
Conclusion:
Owed money without a contract is happened between friends, family members or relatives. Most of case, we enter into a verbal agreement while lending money to them. In the same way, people often hurry and deal in a verbal business transaction; at that time they do not think to make a legally binding agreement. If the other party fail to complete the business transaction due to non-payment, it will result in a legal dispute about what is owed. Therefore, it is advisable to make a written agreement instead of a verbal it will help to resolve future disputes related to your owed money.
