Verbal Agreement (Oral Contract)

Usually, yes. Ontario law does not require a signature or a document for most business contracts. A spoken agreement binds the parties when the ordinary elements of a contract are present:

• an offer and an acceptance of that offer;
• consideration, meaning each side gives or promises something of value;
• an intention to create legal relations, which courts presume in commercial dealings;
• legal capacity to contract; and
• terms certain enough to enforce, such as price, scope and timing.

Statute confirms the point for sales of goods. Section 4 of Ontario's Sale of Goods Act says a contract of sale may be made in writing, by word of mouth, partly in each, or implied from the parties' conduct. The Act once made larger sales unenforceable without some writing, but that section was repealed in 1994.

Contracts also form across channels: a phone call followed by a confirming text, a quote accepted by email, or work started after a meeting. Courts look at what a reasonable person would conclude from the words and conduct, not at what one side privately intended. Planning to sign a formal document later does not automatically mean nothing is binding yet. Parties who want no deal until signing should say so expressly, for example by making an offer "subject to a signed written agreement". Our guide to the business agreements every Ontario company needs maps which contracts to document at each stage, from formation to financing.

The main exceptions come from Ontario's Statute of Frauds. Section 4 provides that no action can be brought on the following unless the agreement, or a note or memorandum of it, is in writing and signed by the party being sued or someone that party lawfully authorized:

• a promise to answer for the debt, default or miscarriage of another person, which is why a personal guarantee must be signed;
• a contract or sale of land, or of any interest in land, such as an agreement of purchase and sale; and
• a promise by an executor or administrator to pay damages out of their own estate.

The same statute requires signed writing to create or assign interests in land, with a narrow exception for some leases of three years or less, and to declare a trust of land. It also covers a promise, made after reaching adulthood, to pay a debt incurred as a minor, and an assurance about another person's credit or character given so that person can obtain money, goods or credit. Ontario's version does not include the old English category of agreements that cannot be performed within a year.

Other statutes add their own writing rules. A unanimous shareholder agreement under section 108 of the Business Corporations Act must be a written agreement among all the shareholders. Section 13(4) of the federal Copyright Act makes an assignment of copyright, or a grant of an interest in it by licence, invalid unless it is in writing and signed by the owner or the owner's authorized agent; see IP assignment agreement.

Writing does not have to mean paper. Under the Electronic Commerce Act, 2000, an email or PDF can satisfy a writing requirement and an electronic signature can satisfy a signature requirement.

Section 4 does not make an unwritten land deal or guarantee void; it bars an action to enforce it. For contracts involving land, equity softens that rule through the doctrine of part performance.

In 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112, the trial judge found that the parties had made a binding oral agreement in September 2019 for the sale of a 32-acre parcel in Milton. The parties then began the closing process through their lawyers, and on the closing date the buyer tendered the required documents and the purchase funds. The seller refused to close and relied on the Statute of Frauds. The trial judge ordered specific performance, the Court of Appeal dismissed the seller's appeal, and the Supreme Court of Canada refused leave to appeal on October 2, 2025.

The Court of Appeal focused on detrimental reliance: whether the party seeking enforcement acted to its detriment by carrying out all or a significant part of its own obligations under the oral deal in a way that could not be undone, while the other side stood by, making it inequitable for the other side to rely on the statute. Part performance is decided on the facts of each case. It is a remedy for a deal that went wrong, not a substitute for a signed agreement.

The weakness of an oral contract is evidence. If the parties later disagree, the person relying on the contract must prove that it exists and what its terms were on a balance of probabilities, often through a credibility contest about conversations that happened months or years earlier. Useful evidence includes:

• texts, emails and voicemails that refer to the deal, especially a message confirming the terms;
• quotes, invoices, purchase orders and payment records;
• conduct consistent with the terms, such as delivery, partial payment or starting the work; and
• witnesses who heard the agreement being made.

A court cannot enforce terms that were never agreed. If price, scope or duration is missing, a court may find there was no contract at all, or may fill a minor gap with an implied term such as a reasonable price. Oral contracts also tend to leave out the clauses that matter most in a dispute, such as limits on liability, termination rights and dispute resolution, which leaves the general law to decide what counts as a material breach.

Time limits apply to oral and written contracts alike. Under the Limitations Act, 2002, the basic period is two years from the day the claim was discovered, subject to a 15-year ultimate limit; see limitation period.

A few habits reduce the chance that a verbal agreement turns into a dispute:

1. Send a short confirming email after any call where terms are agreed, and ask the other side to reply if anything is wrong.
2. State in quotes and proposals when your business intends to be bound, for example only on a signed order or written acceptance.
3. Tell managers and sales staff who may commit the company and up to what amount, since their words can bind it.
4. Put guarantees, land deals, shareholder arrangements and IP transfers in signed writing every time.
5. For a business purchase or investment, use a letter of intent that says which terms are binding, followed by a full written agreement.
6. When a deal agreed orally is later written up, check that every promise you rely on made it into the document, because an entire agreement clause will usually bar claims based on oral promises made before signing.

Lamba Law's business agreements and contracts service can turn a working relationship built on handshakes into a written agreement that reflects what the parties actually agreed.

Andre Baptiste runs a sign company in Mississauga. In March, he agrees by phone with Nadia Rahman, who owns three restaurants in Brampton, to make and install exterior signs at all three locations for $18,000 plus HST. Nadia's business partner, Victor Lee, joins the call and says he will personally cover the bill if the restaurants fall behind. Andre texts Nadia the next morning: "Confirming three signs, $18,000 plus HST, 50% deposit, balance on install." Nadia replies, "Sounds good, deposit coming today," and pays $9,000.

After two signs are installed, Nadia cancels the third and refuses to pay the balance, saying the deal was only ever for two signs. Andre's text, her reply, a deposit equal to half of the three-sign price and his fabrication records make his version far more credible, and the restaurant company settles for $7,500 before trial.

Victor's promise does not help Andre. It was a spoken promise to answer for another person's debt, and because Victor never signed anything, the Statute of Frauds bars an action against him on it. Had Andre asked for a one-page signed guarantee, he could have pursued Victor for any shortfall.