Verbal agreements are legal contracts based on verbal communications. They can take many forms, from an informal promise made between two people to a complex agreement involving lawyers and court-ordered settlements. But in general, verbal agreements are legally binding and hold similar weight to written contracts. A verbal agreement is formed when two parties come to a mutual understanding and accept it verbally, without the need for any paperwork or written documentation. Essentially, parties agree verbally to certain obligations that must be fulfilled. If either party breaches their obligations, the other party may pursue legal action against them. To ensure your verbal agreement is valid and enforceable, it must meet three criteria: clarity of terms, knowledge of all mentioned terms, and subject matter proof.