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When does a promise become a contract?

Most of us make promises to the people we interact with on an everyday basis. However, it is possible the law may consider some of our verbal promises legally binding.

Many people believe that you must “sign on the dotted line” for anything to become official. According to FindLaw, a statement or promise can become a legal contract if one party experiences financial injury due to relying on that promise.

What is “financial injury?” 

Financial injury involves losing anticipated monies or profit. However, whether or not your verbal promise becomes a contract depends on the actions of the supposedly-injured party.

For instance, if you make a promise and the other party takes actions in reliance on that promise and loses money as a result, the courts may find you liable. However, if the other party takes actions that you could not have predicted and the other party experiences financial injury, the courts will not hold you liable.

What is an example? 

Imagine that you offer your friend $200 a weekend to babysit your children for the summer. Your friend verbally agrees, and quits his weekend job in anticipation. Then, you find that your sister is willing to do it for $100 a weekend.

If you rescind the offer from your friend, you have caused him financial injury as he quit the other job and he could potentially sue. On the other hand, assume you offer the job to your friend and he cancels his health insurance because he thinks you will provide it. Then, he sustains injury and has to pay out of pocket due to not having insurance. In this case, courts will not enforce this since insurance had nothing to do with your initial promise.