Dedicated Lawyers With High Performance in Business Litigation

Can you collect on a debt if you only have an oral contract?

On Behalf of | Jul 26, 2021 | Business Law

As a business professional, you probably get contracts for most of your major projects. Having everything in writing protects you and makes the obligations of everyone involved clear. Written contracts are also much easier to enforce if there is eventually conflict about the agreement.

As a supplier or service provider that markets to other businesses, you may sometimes need to jump right in and start work on big projects. What happens if you deliver supplies or start work on a project after an oral agreement, only to have the other party refuse to pay you? Do you have to take a loss, or can you pursue collection activities against the other company involved?

The Texas courts recognize and enforce oral agreements

With only a few exceptions, such as real estate transactions, most business agreements can occur through oral agreements in Texas. Although it can be more difficult to prove exactly what terms you set in an oral agreement, that doesn’t mean you should write off the debt when the other party won’t pay.

For example, you probably quoted them the same prices or rates you offer most other clients. Providing an example of your written contract and explaining how it overlaps with your oral agreement can help demonstrate the value of your claim to the courts. Email communication with the other party could also help you validate your claim that they agreed to the services or received certain goods or supplies, only to refuse to pay you.

The courts can potentially help you collect on those unpaid invoices

Letting one client or customer get away with defrauding you by not upholding an oral agreement may not seem like a big issue. In fact, your business may have to invest significant time in the enforcement of the contract, which may make it seem like a losing proposition.

However, once you let one business get away with non-payment, you could be in a weaker position if you encounter the same issue in the future. Learning from the situation by always submitting a contract to the other party before delivering anything or starting work is great, but getting paid what they owe you is even better.

When you understand your collection rights under Texas law, it will be easier for you to protect your business and its bottom line.