Verbal Agreement on Money: Understanding the Risks and Importance of Putting Agreements in Writing
When it comes to money matters, verbal agreements can seem like a quick and easy way to establish financial responsibilities between two parties. However, while it may feel convenient to rely on verbal agreements, they can lead to several significant risks and issues down the road.
In many cases, verbal agreements on money are made between friends, family, or business partners. For example, a friend might lend money to another friend to start a business, or a family member might give another family member a loan to cover unexpected expenses. While these transactions may seem simple and straightforward at the time, they can quickly become complicated when there`s a disagreement.
One of the most significant risks of verbal agreements on money is that they are challenging to prove in court. Without proper documentation, it`s challenging for either party to prove what was agreed upon and what their responsibilities were. Even if one party has evidence of the verbal agreement, such as text messages or voicemails, it can be challenging to prove the terms of the agreement, and the judge may not consider them as legally binding.
Additionally, verbal agreements can often lead to misunderstandings and miscommunications. Even if both parties think they`re on the same page, small misunderstandings can quickly escalate into major disagreements. This can be particularly problematic if the agreement involves a significant amount of money or a long-term commitment.
To avoid these risks, it`s crucial to put any agreements involving money in writing. A written agreement ensures that both parties are aware of their responsibilities and obligations, as well as the consequences of not fulfilling them. Additionally, putting agreements in writing makes it easier to prove the terms of the agreement in court if necessary.
When creating a written agreement, it`s essential to be clear and precise about the terms of the agreement. Both parties should agree on the amount of money involved, the terms of repayment, and any consequences for failing to meet those terms. The written agreement should also include a timeline for repayment, as well as any interest or fees associated with the loan.
In conclusion, while verbal agreements on money may seem convenient in the moment, they come with several significant risks and issues. To avoid these risks, it`s crucial to put any agreements involving money in writing. Doing so ensures that both parties are aware of their responsibilities and obligations, and makes it easier to prove the terms of the agreement in court if necessary. Remember, when it comes to money, it`s always better to be safe than sorry.