The Dangers of 'Handshake Deals': Enforcing Verbal Agreements in Ecuador

As an Ecuadorian lawyer with extensive experience practicing in Cuenca, I’ve seen countless disputes arise from the deep-seated cultural preference for trust over paper. For many, a person’s word—la palabra—and a handshake are the cornerstones of an agreement. While this tradition is honorable, for both expats and locals, relying on it for significant transactions is a perilous legal gamble. The Ecuadorian legal system, rooted in civil law, prioritizes documented proof, making the enforcement of verbal agreements a formidable, often impossible, challenge.

This article provides an expert analysis of verbal agreements under Ecuadorian law, detailing why they are so difficult to enforce and offering concrete strategies to protect your legal and financial interests.

The Ecuadorian Legal Framework: The Primacy of Written Evidence

Ecuadorian law defines a contract in Artículo 1454 of the Código Civil as a convention where one party obligates itself to another to give, do, or not do something. While this definition does not inherently exclude verbal agreements for all matters, the procedural and evidentiary rules create insurmountable hurdles for their enforcement in most cases of consequence.

The critical issue is not the formation of the agreement, but the proof of its existence and terms. The Código Orgánico General de Procesos (COGEP), our code of civil procedure, outlines the acceptable means of proof in Artículo 189. While witness testimony (prueba testimonial) is permitted, it is considered one of the weakest forms of evidence, especially when it is self-serving and stands alone without documentary support (prueba documental).

Furthermore, the Código Civil itself imposes a strict writing requirement for certain obligations. Artículo 1726 mandates that any act or contract containing an obligation to pay a sum of money or deliver something with a value exceeding two Salarios Básicos Unificados (SBU) must be in writing.

Hyper-Specific Detail #1: The SBU, or unified basic salary, is set annually. For 2024, the SBU is $460 USD. Therefore, any verbal agreement for an amount exceeding $920 USD (2 x $460) is legally unenforceable in court for want of written proof. This is not a guideline; it is a statutory bar to enforcement.

Why Verbal Agreements Fail in Ecuadorian Courts

The burden of proof rests entirely on the party attempting to enforce the verbal contract. Without a written instrument, this burden is nearly impossible to meet.

Key Challenges Include:

Lack of Tangible Evidence: A judge cannot rule on terms they cannot verify. Without a signed document, there is no objective proof of the price, deadlines, scope of work, or even the identity of the parties.
Contradictory Testimonies: In a "he said, she said" scenario, a judge is often left with two conflicting sworn testimonies and no basis to favor one over the other. The default ruling is often to dismiss the claim for lack of evidence.
Statutory Prohibitions: As noted, for specific transactions, the law is absolute. Real estate sales, for instance, are legally non-existent without a public deed (Escritura Pública) registered with the Property Registry (Registro de la Propiedad). Similarly, formal employment contracts must be registered with the Ministry of Labor's SUT system.
The "Maestro" Problem: A classic Cuenca scenario involves hiring a builder or contractor (maestro) for a home renovation based on a verbal quote. The expat pays a 50% cash advance with no receipt (recibo). The work is substandard, or the maestro vanishes. With no written scope of work or proof of payment, legal recourse is practically zero.

Common Pitfalls for Expats

Expats, accustomed to different legal norms and eager to integrate into the local culture of trust, are particularly susceptible to these pitfalls.

Property Rentals: A verbal lease agreement is a common mistake. While the Ley de Inquilinato (Tenancy Law) provides tenant protections, enforcing them requires proving the terms of the tenancy. Without a written contract, disputes over the security deposit (garantía), rent increases, or the legal notice period for termination become your word against the landlord's. A written contract, registered with the appropriate municipal office, is your only real protection.
Hiring Services and Contractors: Engaging a professional for services like construction, design, or even transportation based on a verbal estimate is high-risk. When the final bill is double the estimate or the work is incomplete, you have no documented "scope of work" to hold them accountable.
Personal Loans: Lending money to a friend or acquaintance without a signed promissory note (pagaré) is a frequent source of lost funds and broken relationships. A pagaré, a simple one-page document, is a powerful and easily enforceable instrument in Ecuadorian courts, whereas a verbal promise to repay is not.

Strategies for Mitigating Risk: The Power of Documentation

While enforcing a purely verbal agreement is a losing battle, you can take proactive steps to ensure your understandings are legally sound.

1. The Golden Rule: Get It in Writing

Any agreement involving a significant sum (anything over a few hundred dollars), services, or property rights must be memorialized in a written contract.

Essential Elements of a Contract:
- Identification of Parties: Full names, cédula or passport numbers, and addresses.
- The Object: A precise description of the goods, services, or property involved.
- Obligations: Clearly state who must do what, by when.
- Price and Payment Terms: Specify the total cost, currency (USD), payment schedule, and method.
- Term: Start and end dates.
- Signatures: All parties must sign. For added security, have signatures notarized.

Hyper-Specific Detail #2: A simple but powerful step is to take your private contract to a Notary for a "reconocimiento de firma y rúbrica" (recognition of signature and rubric). This is a notarial act where the parties affirm in the notary's presence that the signatures on the document are theirs. This act elevates the document to have the force of public evidence and makes it significantly easier to enforce. The cost is minimal, typically $20-$25 per signature.

2. When a Formal Contract Isn't Practical

For smaller, informal agreements, create a paper trail.

Email & WhatsApp: Follow up a verbal conversation with a message summarizing the key points: "To confirm our talk, we agreed to X, for a price of Y, to be completed by Z. Please confirm this is correct." While not as strong as a contract, this creates a time-stamped record of the understanding.
Create Your Own Proof of Payment: If you pay in cash and the other party doesn't provide a receipt, write one yourself. Detail the date, amount, purpose of payment, and the names of both parties, and have them sign it. A simple signed note is better than nothing.

3. The Last Resort: The Sworn Statement

If you find yourself in a dispute with only a verbal agreement, there is one limited tool you can use to create evidence after the fact, though it is no substitute for a contract.

Hyper-Specific Detail #3: You can go to a Notary and execute a "Declaración Juramentada" (sworn statement). In this unilateral document, you declare under oath the terms of the verbal agreement as you understand them. While the other party does not sign it, it creates a formal, public record of your claim that can be presented as supporting evidence in a legal proceeding. A judge is not obligated to accept it as absolute truth, but it carries more weight than a simple verbal assertion in court. The approximate cost for a notary to prepare and execute this is $50-$80.

Legal Checklist for Cuenca Expats

Does this agreement involve more than $920 USD? If so, a written contract is legally mandatory for enforcement.
Does the agreement involve real estate, employment, or forming a company? These require specific formal documents (escritura, contrato de trabajo, estatutos).
Have I insisted on a written document that clearly outlines all terms?
For important private contracts, have I taken the extra step to get a "reconocimiento de firma y rúbrica" at a notary?
If paying cash, do I have a signed "recibo" (receipt) as proof of payment?
If a dispute seems likely, have I considered creating a "Declaración Juramentada" to document my position?
Have I consulted with a local attorney before signing anything of significant value?

Conclusion: A Culture of Trust, A System of Proof

Ecuador's culture of personal trust is one of its most appealing qualities. However, the legal system operates on a foundation of verifiable proof. Relying on handshakes and verbal promises for anything more than minor, casual arrangements is an unnecessary risk that can lead to significant financial loss and personal distress.

By embracing the simple practice of documenting your agreements, you are not showing distrust; you are demonstrating respect for clarity and ensuring that both parties are protected under Ecuadorian law. A clear, written contract is the foundation of a secure and successful transaction, providing peace of mind for everyone involved.