Many people are unaware that there are just a few types of agreement that are valid only if recorded in writing and signed – most notably contracts for the sale, exchange, or donation of land or of any “interest in land”, ante-nuptial contracts (ANCs), and deeds of suretyship.
Outside of those exceptions, all verbal agreements are as valid and enforceable as written ones. Your word really is your bond! So be careful what you agree to verbally – and stick to written agreements whenever there’s a lot at stake. A recent High Court judgment provides a great practical example of those principles at work.
When friends fall out
It’s 2009, and the MD of a long-established Cape Town freight operation is doing business with another business owner. Their relationship develops from a strictly business one into a personal, “best friend” one.
By 2012, they have agreed verbally that the friend will move to Johannesburg to establish a branch of the freight company there as a new director.
Believing that he will now be given a 5% share in the company and be appointed as a director, the friend pays the company R1m to cover the new branch’s start-up funding. But when he asks for his shares, the MD refuses, denying there was ever any agreement to give him equity and telling him that the R1m was just an “at-risk investment”.
The refusal to give him shares, says the friend, is a repudiation (renunciation) of the oral agreement, and he demands that the company now repay his R1m.
The company, through its MD, refuses – “I’ll see you in court,” he says. In the latest (2025) round of litigation, the Court, without a written agreement before it, has to analyse a litany of contradictory evidence to try and work out what exactly had been verbally agreed by the two ex-friends.
Offer someone a carrot and you’ll have to give it to them
The Court was unimpressed with the MD’s version that his friend’s R1m payment was an “at-risk investment” rather than the agreed purchase price of a 5% shareholding. A major factor in that decision was clearly the director’s 2013 email to his friend which included this: “…I have committed to sell you equity...”, reinforced by his evidence that he only changed his mind about parting with shares in 2014.
The nail in the MD’s coffin was no doubt his admission that that he had held out the prospect of his friend becoming an equity partner as “a carrot”. His friend accepted that offer, their oral agreement became binding, and the company must repay the friend his R1m plus interest and costs.
Offer someone a carrot, and our law will hold you to deliver it!
“The bluntest pencil is better than the sharpest memory”
While it seems justice has been done, both the falling out and the court case could have been avoided altogether.
Had the MD and his friend thought the whole thing through properly back in 2012 and asked a lawyer to draw up a proper written agreement for them, it’s highly unlikely that they would, in 2025, still be fighting their way through the courts. Who knows, they might never have come to blows at all and could still be BFFs!
Don’t rely on a “handshake” agreement, even with the best of friends. When the stakes are high, let us help you put it in writing – clearly, enforceably, and with a minimum of fuss.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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