The Power of Promises: What Makes a Promise Legally Binding? – Dr. Maxwell Ampong

What is the weight of a promise? A promise is a powerful thing. In law and in business, not every promise carries weight. Some promises are just words, while others can land you in court if you break them. I came across this legal principle while preparing an academic submission for my ongoing Master of Laws degree studies. It’s something every entrepreneur should understand.
Ever wondered why some handshake deals stand firm while others collapse the moment something goes wrong? Or why verbal agreements sometimes hold up in court and other times mean nothing at all? That’s because not all promises are legally binding. There’s a fine line between a casual commitment and an enforceable contract. Understanding that line can save you from serious business pitfalls.
I’ve asked myself before, “What makes a promise legally binding?” I also wondered why some promises don’t need a written contract and how businesses can protect themselves when making agreements. Whether you’re an entrepreneur, an executive, or just someone who wants to avoid making costly promises, I think I just found the answers.
Before we dive in, a quick note: this article is for informational purposes only and does not constitute legal advice. While I’ve drawn on credible sources and case law to provide insights, every legal situation is different. If you’re facing a contract dispute or need tailored guidance, always consult a qualified legal professional. Now, let’s get into it.

The Basics: What Makes a Promise Legally Binding?
Not every promise is a contract, and not every contract is enforceable. A promise only becomes legally binding when certain key elements are present. It’s not just about saying, “I promise.” There has to be structure, intent, and something of value exchanged.
The four core elements that make a promise enforceable are:

1. Offer – One party proposes a deal.

2. Acceptance – The other party agrees to the terms.

3. Consideration – Something of value is exchanged.

4. Intention to Create Legal Relations – Both parties must mean business.

If any of these elements are missing, you might have a moral or ethical obligation, but not necessarily a legal one. For example, if you casually promise to buy your friend lunch next week, there’s no consideration (nothing is being exchanged), so the law won’t step in if you change your mind.
But let’s say you’re running a business, and you promise to pay a supplier extra to speed up delivery. Is that promise binding? It depends, because consideration and intention to create legal relations become critical.
Understanding these basics will help you navigate agreements, protect your business, and avoid costly misunderstandings.

The Role of Consideration (What Are You Giving in Return?)
In contract law, a promise is usually only binding if something of value, also known as “consideration”, is exchanged. This is what separates a legally enforceable promise from a casual statement.

What is Consideration?
Consideration is the value given in return for a promise. It can be:
• Money (paying for a product or service)
• Goods or services (trading skills or products)
• A promise to do something (e.g., completing a job by a deadline)
• A promise not to do something (e.g., agreeing not to compete in a particular market)

No Consideration, No Contract (Usually!)
A promise without consideration is just a gift. It is not a legally binding contract. If someone says, “I’ll give you $1,000 next week,” but you give nothing in return, they can change their mind, and you can’t sue them for it.
But let’s look at a real business scenario.

Case Example – Williams v Roffey Bros [1990] A contractor in the UK (Roffey Bros) promised to pay a subcontractor (Williams) extra money to finish a job on time. The court ruled this was a legally binding promise because Roffey Bros gained a practical benefit by avoiding late penalties and project delays. Even though Williams was already contractually obligated to do the work, the extra payment was enforceable because it gave Roffey Bros real, measurable value.

Exceptions: When Consideration Isn’t Needed
There are times when a promise can be enforced without consideration, such as under promissory estoppel, when breaking it would cause significant harm to the other party. So, if breaking your promise causes damage to the promisee, then the promisor might be liable.

Why Consideration Matters for Entrepreneurs
If you’re making a business deal, always ensure there’s something of value being exchanged: it protects both sides. Without consideration, a promise is just words, and in business, words alone aren’t enough.

Promises in Business: Verbal vs. Written Agreements
In business, deals are made every day, some with contracts, some with just a handshake. But when it comes to legal enforceability, is a verbal promise enough? The answer: sometimes, but not always.

When is a Verbal Agreement Binding?
In most cases, verbal agreements can be legally binding if they meet the basic contract requirements as earlier outlined in the article: offer, acceptance, consideration, and intention to create legal relations. If all four elements exist, a spoken agreement can hold just as much weight as a written one.
For example, if you verbally agree to supply a client with 10,000 units of a product at a set price, and they accept, you could be held to that promise, even if there’s no written contract. Courts have enforced oral contracts in cases where there was clear proof of agreement and reliance on the promise.

Why Written Contracts Are Critical in Business
Despite verbal agreements being potentially enforceable, written contracts eliminate doubt. They:
• Clarify terms: Preventing misunderstandings.
• Provide proof: No “he said, she said” arguments in court.
• Protect both parties: Making obligations clear.

Certain contracts must be in writing to be valid, including:
• Real estate transactions
• Agreements lasting more than a year
• High-value business deals

Common Business Mistakes with Verbal Agreements
Many entrepreneurs fall into these traps:
• Assuming a handshake deal is “good enough”: It works in the movies but not real life. Without evidence, it’s hard to enforce.
• Not documenting changes: A small adjustment to a deal could make it unenforceable later.
• Failing to set clear terms: Vague promises lead to disputes.

The Bottom Line
If the deal is significant, ensure it is documented. While verbal agreements may hold validity in certain circumstances, in business, a written contract reduces risk and protects all parties involved.

Exceptions: When a Promise is Enforceable Without Consideration
Typically, a promise is only binding if there’s consideration (something of value exchanged between the parties). But contract law isn’t always that rigid. There are exceptions where a promise can still be enforced even when nothing is given in return.

1. Promissory Estoppel: When Breaking a Promise Is Unfair

Promissory estoppel protects someone who has relied on a promise and would suffer harm if it were broken.
Example: A landlord tells a struggling tenant, “Don’t worry about paying rent for the next three months.” If the tenant relies on this and spends their rent money elsewhere, the landlord can’t suddenly go back on their word, even though the tenant didn’t give anything in return.
Key Rule: The promise must have been reasonably relied on, and breaking it must cause real financial or legal harm.

2. Contracts Under Seal: No Consideration Needed

A contract signed and sealed (often called a deed) is enforceable even without consideration. This is common in:
• Property transactions
• Legal settlements
• Guarantees in financing agreements
A deed is arguably one of the safest ways for a business to make a legally binding promise without requiring consideration.

3. Past Consideration: Rare But Possible

In most cases, past actions don’t count as consideration (e.g., if someone does a favour for you, you can’t later be forced to pay them). But in some legal systems, past consideration can be valid if:
• It was done at the promisor’s request
• There was an expectation of payment
• The payment is reasonable and fair
Example: If a company asks a supplier to rush an order before discussing payment, and the supplier does it, the company may still be required to pay under some legal principles.

Why This Matters in Business
These exceptions highlight a key principle: promises aren’t always just words. Entrepreneurs and business leaders must understand when a promise becomes a liability, even without a written contract or immediate exchange of value.

Real-World Application: How This Affects Entrepreneurs & Businesses
Understanding when a promise is legally binding isn’t just about legal theory. It’s about protecting yourself in business. Whether you’re closing deals, negotiating contracts, or making commitments, knowing where the law stands can save you from costly mistakes.

1. Be Careful with Verbal Promises

Many business disputes start with informal agreements. A casual promise made over coffee or on a phone call can sometimes be enforced in court.
Lesson: If it’s important, put it in writing. Even a simple email confirming terms can serve as proof.

2. Don’t Rely on “Good Faith” Alone

Business relationships are built on trust, but trust isn’t a legal contract. You might believe that a supplier, investor, or partner will honour their word, but what recourse do you have if they don’t?
Lesson: If a promise is critical to your business, ensure it is supported by consideration or a written agreement.

3. Know When a Handshake Deal is Enough

Some industries operate heavily on verbal contracts, especially in small business, consulting, and supply chain agreements. If you work in these spaces, knowing the exceptions (like promissory estoppel) can help protect your interests.
Lesson: If you’re relying on a promise, ensure there’s evidence of reliance, like emails, messages, or witnesses who can confirm the agreement.

4. Beware of Making Off-the-Cuff Promises

If you’re a business owner or manager, you might promise bonuses, promotions, or price guarantees in the heat of the moment. If an employee or customer relies on that promise, it could become legally binding.
Lesson: Be mindful of your words. If you need flexibility, use conditional language (e.g., “We’ll do our best to accommodate that”).

5. Use Contracts Smartly, Not Just Formally

Many business owners think contracts are just a legal requirement. In reality, they’re powerful tools for clarifying expectations, avoiding disputes, and safeguarding business relationships.
Lesson: A well-drafted contract isn’t just about legal protection; it’s about preventing misunderstandings before they happen.

The Fine Line Between Ethical and Legal Promises
Not every promise is legally binding in business, but that doesn’t mean it should be broken. Some commitments might not hold up in court, yet they carry enormous weight in terms of trust, reputation, and long-term success. There’s a fine line between what the law requires and what is ethically expected, and smart business leaders and entrepreneurs know the difference.

1. The Law vs. Business Ethics: Where Do They Clash?

Legally, a promise is enforceable only if it meets the contractual elements (offer, acceptance, consideration, and intent). However, in the real world, business reputation is often built on promises that go beyond legal obligations.
Example: A supplier agrees to honour a price quote for a loyal customer, even though costs have risen. Legally, they may not be required to do so, but breaking that promise could destroy trust and future business.
In contrast, some companies rely too heavily on legal technicalities to avoid responsibility. They hide behind the fine print, making promises they know customers won’t be able to enforce in court. While this might be legal, it’s an easy way to lose credibility.

2. When a Business Should Keep a Promise, Even If It’s Not Legally Required

Some of the world’s most successful companies have built their brands by doing more than what’s legally necessary.
• Amazon’s Customer-First Approach:
Amazon often goes beyond the legal minimum in customer service, offering refunds and replacements even when policies don’t require them. Why? Because long-term customer trust is more valuable than short-term savings.
• Zappos’ Legendary Customer Service:
Zappos built its entire business model around delivering happiness, even replacing lost packages for free. Although it was not legally required to do this, the move cemented its reputation as a brand that genuinely cares.
• Tesla’s Unwritten Software Updates:
Tesla has been known to offer free software upgrades to older car models, even though no legal contract requires them to do so. This goodwill enhances brand loyalty and customer retention.
Lesson: If your business consistently goes the extra mile, it can create an edge that competitors can’t copy.

3. The Risk of Over-Promising and Under-Delivering

While keeping ethical promises builds trust, making commitments you can’t keep is just as dangerous. Many businesses have collapsed due to over-promising and under-delivering.
Example: In 2017, Fyre Festival promised a luxury music festival experience but delivered disaster. Attendees paid thousands for an exclusive experience, only to arrive at a poorly organised event with no infrastructure. The result? Massive lawsuits and a reputation permanently destroyed.
Lesson: Never make promises that your business model cannot support. Even if you are not legally obligated to fulfil an unrealistic claim, failing to meet expectations can be disastrous.

4. Finding the Right Balance in Business Commitments

So, how do you strike the right balance between legal obligations and ethical responsibility?
• Set realistic expectations. Never promise what you can’t deliver.
• Be transparent. If you can’t meet a commitment, communicate early and honestly.
• Think long-term. A short-term loss (honouring an ethical promise) can lead to long-term gains (customer loyalty).
• Use contracts wisely. Document key business promises, but always be prepared to go beyond the fine print when fairness demands it.

The Power of Promise in Business and Law
A promise is more than just words. It’s a commitment, a reputation marker, and sometimes, a legal obligation. In business, what you say matters just as much as what you put on paper. Deals are made and broken based on trust, and trust is built on consistency. The moment your word starts losing weight, everything else follows.
Contracts exist for a reason, but businesses that thrive aren’t just those that follow the law to the letter. Successful businesses are the ones who understand the real currency of business is credibility. Customers return, partners invest, and teams stay committed when they know they can rely on you, when your yes means yes, and your no means no.
There’s no shortcut to building a reputation of reliability. It’s earned, one kept promise at a time. Whether in contracts, negotiations, or casual commitments, how you handle your promises defines the kind of business you run.
Because at the end of the day, the best advertising isn’t a paid campaign – it’s a name that stands for something.
I hope you found this article insightful and enjoyable. Your feedback is highly valued and appreciated. I welcome your suggestions for topics you want me to address or provide insights on. You can schedule a meeting with me at your convenience through my Calendly at  www.calendly.com/maxwellampong. Alternatively, connect with me through various channels on my Linktree page at www.linktr.ee/themax. Subscribe to the ‘Entrepreneur In You’ newsletter here: https://lnkd.in/d-hgCVPy.
I wish you a highly productive and successful week ahead!
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Dr. Maxwell Ampong serves as the CEO of Maxwell Investments Group. He is also an Honorary Curator at the Ghana National Museum and the Official Business Advisor with Ghana’s largest agricultural trade union under Ghana’s Trade Union Congress (TUC). Chairman of WellMax Inclusive Insurance and Founder of WellMax Micro-Credit, Dr. Ampong writes on relevant economic topics and provides general perspective pieces. “Entrepreneur In You” is supported by GCB Bank PLC and operates under the auspices of the Africa School of Entrepreneurship, an initiative of Maxwell Investments Group.