“Back in my day, a handshake used to mean something.”
I hear this (and similar versions of this) phrase often as an attorney. Even to this day, many relationships and agreements are governed by handshakes, nods, oral statements of acceptance, all without writing anything down. This includes deals on informal property distributions, contractor projects, promotions at work, etc.
Unfortunately, time passes, parties’ memories fade, circumstances change, and money, family, or otherwise become involved. Then the next thing you know, you have a disagreement and a real problem on your hands.
Contrary to popular belief, the handshake deal isn’t gone, but in order to maintain its strength, parties need to protect their rights with specific documentation and physical evidentiary support to avoid conflicts in this digital era.
Agreeing to a Degree
A handshake can still be legally binding in particular circumstances. In Pennsylvania and most states across the country, the handshake is generally still considered evidence of the acceptance and formation of a legally enforceable oral contract.
The required elements to form a contract are an offer, acceptance, and consideration. Simply put, that means you need one party to offer terms of an agreement to another party; the party being offered must agree to those terms, and in those terms, there needs to be a quid pro quo of sorts, or as I often refer to it, both parties need to have some “skin in the game.” As with most simple contracts entered into every day, a handshake can still govern.
Certain contracts, the list of which varies from state to state, such as contracts for the sale of goods over $500, sales of real estate, or contracts that cannot be performed within one year, among others, must be in writing. These contracts fall under what is called the “statute of frauds.” For those particular contracts, the handshake deal is entirely unenforceable and does not create a valid agreement. This is just another reason why you should always think twice before entering into an agreement with a handshake, because it may not mean anything at all.
Agree to Disagree
What happens when the “bulletproof” agreement made over dinner and capped off with a handshake falls through, and both parties are now fighting over what was agreed upon? We’ve now entered the “he-said, she-said” scenario, where everyone is losing time, money, and energy fighting over an agreement that both parties thought was unbreakable. It is usually at this point that an attorney is hired and will ask their client for documentation or evidence regarding the purported agreement, such as:
- Emails and text messages – Discussions about price, scope of agreed-upon work, mandatory deadlines, responsibilities of the parties, payment terms, etc.
- Invoices and payments – An invoice that was sent and paid (or not paid) is a strong indication that both parties understood there was an obligation and what was owed as a result of failure to perform.
- Proposals, estimates, and quotes – Even if not a signed contract, these types of documents help provide insight into what terms were offered and what terms parties thought they had agreed upon.
- Actual performance by the parties – Evidence of what either party actually performed as a result of the alleged agreement can be really powerful support one way or the other.
Having any of these in your back pocket, even when the original deal was a handshake over dinner, can be extremely helpful should litigation arise.
Let’s Shake on It (With a Writing Outlining our Terms)
This article should not be read as an opinion piece urging parties to stop building and cultivating the professional relationships between business partners and colleagues that older generations tell us about. It is still extremely important to be active in our communities and to enter business relationships founded on trust and respect, in which both parties would be happy to enter a “handshake deal” without batting an eye.
However, it is crucial to remember that in business, protecting your rights and assets must always be at the forefront of your actions. You never know when a disagreement may arise, or when a differing understanding of terms that were orally agreed upon decades ago may prove extremely costly in the future.
Regardless of which deals are legally required to be in writing, it is this author’s understanding, and strong call to action, that every single deal or agreement entered—no matter how large or small—should be in writing, signed by both parties, outlining the key terms and obligations thereof. Deals should be well-documented, recorded, drafted, edited, revised, and highly scrutinized before both parties agree to “shake on it.”
