The Cost of an Unwritten Agreement
Sometimes, the most expensive disputes begin with a simple promise that nobody thought
needed to be written down.
Many business and everyday agreements start with a conversation. Two people discuss the
terms, shake hands and proceed based on mutual trust. It can mean lending money, renting
property, forming a business partnership or agreeing to provide service.
At the time everything seems clear. Writing down the agreement might feel unnecessary or even uncomfortable. But when one person remembers things differently, a simple understanding can
turn into a costly problem.
When Trust Is Not the Problem—but Memory Is
As legal consultants we see how arrangements never properly documented give rise to
misunderstandings. One regards the payment as a loan, the other as an investment. The
landlord expects the tenant to vacate on a certain date, but the tenant thought they had
negotiated an extension.
Sometimes no one meant to fool anyone. The problem is that the agreement was never clearly
written down.
When there are disagreements, each side may sincerely believe they are right. Without good
evidence it can be hard to know what was promised and the obligations of the parties.
Is a Verbal Agreement Legally Binding?
Some people think that a contract is only legally binding if it is in writing and signed.
In Thailand, a verbal agreement can be legally binding. But what can be enforced depends on
the type of transaction, legal requirements, and evidence.
Some transactions need to be formalized, for example in writing, signatures or registration. A
verbal agreement may not be sufficient.
Verbal agreements are legally binding, but the terms of the agreement are hard to prove. If a
dispute does arise, important evidence may include messages, emails, payment records,
receipts, witnesses and the conduct of the parties.
The Real Cost of Leaving Things Unwritten
The cost of an unwritten agreement is not always obvious. This could be a missed payment or a
dispute about a deadline. The fallout can include legal costs, business disruption, delayed deals
and strained relationships down the road.
Picture two business partners who verbally agree to share costs and earnings 50/50. Months
later one contributes more money and takes on additional responsibilities. When they split the
profits, they would argue about what was promised in the beginning.
If you don’t have clear documentation, it can be difficult and expensive to resolve the
disagreement. A written agreement could have clarified each person's contributions,
responsibilities, profit-sharing arrangements, and procedures for handling disputes.
Not every disagreement can be prevented by a contract, but clear terms can reduce uncertainty
and help protect both parties.
What Should You Do Before Making a Promise?
But not every conversation has to be a formal contract. But when money, property, business
interests or major obligations come into play, a few precautions can make a difference.
Write down important terms such as payment amounts, deadlines, obligations & terms.
Confirm that everyone understands the agreement. Make assumptions clear before they
become a source of conflict.
Keep supporting records such as receipts, bank transfer confirmations, relevant messages
and emails.
Check legal requirements. Some transactions have certain formalities or documents.
Consider what might happen if things go wrong. Handle delays, cancelation, non-
performance and dispute resolution
For significant transactions, having an agreement reviewed before signing can help identify
unclear terms and potential risks while there is still time to address them.
Clarity Today Can Prevent Disputes Tomorrow
When there is a disagreement, people tend to think in terms of who is right. By now
relationships may be strained, and the whole thing may be harder to resolve than anyone
thought. Getting an agreement on the front end can help prevent ambiguity down the line. It
does not mean the anticipation of the worst of another person. It means knowing that even if two people are both honest, they can still hear the same conversation differently. Handshakes might start a deal, but clear terms let both sides know what they’re signing up for. The cost of putting an agreement in writing is often far less than the cost of arguing about what was never written down.