Oral Contracts and Agency: Working out Who Owes What

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For a host of reasons, folks often enter contracts through verbal agreement either not fully appreciating that they are entering into a binding contractual relationship or because one or more parties has refused to agree to reduce the contract to writing. While an oral contract may be fine when everything goes as planned, many complications can arise when an oral contract results in a dispute. This was the case in the recent decision of Go Transport Ltd. v Moore, 2021 BCSC 1099 (CanLII).

The Plaintiff, Go Transport, provided trucks and trailers for transporting concrete blocks for a travelling circus. The central issue was whether Go Transport contracted with the defendant, Mr. Moore or the companies which owned the circus as Mr. Moore asserted. Go Transport asserted that it has contracted directly with Mr. Moore and that he owed them $20,946.35 plus interest on the issues it issued to him. Mr. Moore contested that he was an intermediary for the circus companies and was acting only as their agent. If Mr. Moore’s version of events was upheld, Go Transport had named him wrongfully as a defendant instead of the circus companies.

In its analysis the Court first made it clear that oral contracts are enforceable, but that the party asserting the oral contract must establish the parties’ intent to be bound by the contract and the essential terms of the contract. The Court noted that the substance of the contract is more important than its form. The Court also emphasized the challenge in oral contracts is properly interpreting such agreements without the key interpretative aid, which is ordinarily the written words of a contract itself.

Given that it was dealing with an oral contract, the Court found it was called upon to consider the complete context and factual matrix of the circumstances surrounding the alleged contract to determine if it existed and, if so, what its terms were. Mr. Moore, for his part, admitted that he and Go Transport entered a similar contract for services the previous year and was not able to produce evidence he said existed and supported his arguments that the contract in question was entered between Go Transport and the circus companies.

There were bills of lading various addressed to Mr. Moore or iterations of his name, phone calls between Mr. Moore and Go Transport and invoicing addressed to Mr. Moore. Mr. Moore failed to produce evidence of the contract he says existed directly between Go Transport and the circus companies, did not obtain any admissions of such an agreement and produced no evidence that he was acting as an intermediary between Go Transport and the circus companies only.

The Court summed up its findings as follows: “I find the circumstances in 2019 were the same as in 2018: [Mr. Moore] engaged [Go Transport] and [Go Transport] did the work. The only difference is that [Mr. Moore] paid [Go Transport] in 2018. He failed to pay in 2019. The fact that [Go Transport] billed him differently in 2019 does not vitiate the contract.”

Respecting claimed interest, Go Transport alleged that it should be entitled to interest at a rate of 24% based on it including such a claim in its invoicing. The Court made it clear that Go Transport could not unilaterally foist such a term on Mr. Moore by simply including a claim for interest in its invoicing; an agreement to such a term had to be found.

Relying on s. 1(1) of the Court Order Interest Act, the Court found that an appropriate interest rate was the prime lending rate on a simple interest basis. This was in the absence of evidence about what the standard from of interest was but also noting that the basic interest rate under the Court Order Interest Act would be inappropriate in such commercial circumstances.

Go Transport Ltd. v Moore once again underscores how important it is for parties to carefully reduce their contractual arrangements to writing. Even a very simple contract could have clarified for all parties which parties were contracting and which obligations were owed by which party to which party. Go Transport could have secured its 24% interest rate; Mr. Moore could have made it clear that Go Transport was contracting with the circus companies. All parties could have potentially avoided significant legal expense and uncertainty.

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Jeremy Burgess is a litigation associate at Pushor Mitchell with broad experience in litigation including contractual disputes. If you have any questions about a legal dispute, we’d be happy to assist you. Feel free to contact Jeremy in a confidential manner toll free at 1-800-558-1155 or at burgess@pushormitchell.com. You may also contact our litigation group.

The foregoing is for informational purposes only and is not legal advice, nor should be construed as such.