It is often misunderstood that a contract will not be binding if it is not confirmed in writing. However the standard position in contract law is that:

• Where an unconditional offer is made by one party (which can be made verbally or in writing) and;
• Another party relies upon and accepts that offer
• A binding contract will have been formed. 

If the offer is subsequently withdrawn, the party who has relied on it will be able to bring a claim for damages (compensation) in respect of a breach of that contract.
 
How does this work in an employment context?
Employers and their staff should be very careful to ensure they do not make an unconditional job offer to a prospective job candidate verbally. Evidence to support an offer being made verbally may include conversations that have taken place between the parties discussing matters such as:

• Details of the role being offered;
• The hours that will be worked;
• The salary that will be paid etc.

However any offer can also be relied upon. It may even be as simple as using language such as they are “perfect for the role” or that you are “looking forward to working with them” .

Another area where employers can potentially fall into the trap of inadvertently offering employment to an individual is by entering into an unofficial ‘trial period’ in order to test out somebody’s skills before (apparently) committing to anything. Unfortunately this is not as straightforward as it may seem. If the trial period rolls on without any written confirmation being given as to whether or not employment has actually been offered to the individual, then an Employment Tribunal may well consider that a legally binding contract has been formed.
 
Employers should note that (irrespective of whether or not an offer is made verbally or in writing), if the offer is conditional upon the employer obtaining satisfactory references or evidence of qualifications, then the individual cannot take any action if the offer is subsequently withdrawn because they fail to meet those conditions.
 
Does it matter who makes the verbal offer?

No. This was demonstrated in the recent case of McCann v Snozone Ltd 2016 which found that a verbal offer of employment made by a recruitment agent engaged by the Company to source candidates on their behalf, amounted to a binding contract and cost the employer £3,000 when the employer later refused to honour the contract.
 
The employment tribunal took the view that when the candidate was offered the role on the telephone by the recruitment agent and he accepted the role, the conversation had created a binding contract which the employer was then responsible for.
 
How much compensation will usually be awarded for a breach of contract claim?

The level of damages payable for breaching an employment contract in this manner are usually limited to the notice period that would have been provided under the contract. Most contracts set out the statutory minimum for notice periods, which is one week when an individual has been employed for under 2 years. Therefore the likely cost exposure to a business may be fairly minimal. However in the above case, rather than basing the level of damages on the statutory notice period, the employment tribunal went further and assessed what would have been ‘reasonable’ notice.
 
In this case, they determined that one month’s notice would have been reasonable based on the level of seniority that would have been attached to the specific role and the fact that the individual would have been paid monthly.  The employer was also required to repay the Claimant’s fees for issuing the claim at the Tribunal.
 
Whilst the actions of the recruitment agent were costly to the employer in this instance, it is important to note that if the company had explicitly told the recruitment agency they did not have the authority to make potential candidates job offers on their behalf, then no binding contract would have been established and the employer would not have been responsible for any breach of that contract.