What Constitutes a Handshake Deal?
Section 4: The Legal Definition of a Handshake Deal
We’ve all seen the movies. A couple of guys in suits sit down for lunch somewhere; one leans across the table to shake the other’s hand and whisper, "We have a deal." In a sense, the handshake is just the physical manifestation of an agreement that was made verbally.
So what is the legal definition of a handshake deal? Generally speaking, handshake deals fall under the category of verbal agreements, which are simply agreements made between two parties without a written document. This can mean a verbal promise, an informal understanding, or even an unwritten stipulation. As formal as the term "verbal agreement" sounds, it can be much more casual than that.
However , not every verbal agreement is enforceable. That’s because a handshake deal isn’t actually just based on the handshake itself. For there to be a legally-enforceable handshake deal, there must be a "meeting of the minds." This means that both parties need to be in agreement over the terms, or subjects, of the deal. This initial step is essentially the foundation or basis of the agreement. When an offer is made, leading to acceptance, forming the deal, that is when the contract or agreement truly starts to come into effect.
For this reason, handshake agreements are considered primarily verbal agreements, because we can’t see what the intent of the handshake was; therefore, it’s difficult to prove after the fact whether or not the deal ever took form. It’s important to note, then, that just because a handshake was made, does not mean that both parties intended to be bound by the deal.
Essentials of a Binding Handshake Contract
As is the case with any agreement, the first thing it must do is subjectively represent legal intention to create an agreement. The parties to the arrangement must intend their co-operative efforts to have a legally binding effect. This is sometimes satisfied when dealings between the parties are such that it can be said they had a common intention and the matter giving rise to the handshake was on equal terms with others likely to involve contractual relations.
The next essential element to binding agreements, whether a handshake agreement or otherwise, is that there must be an offer followed by acceptance. Without some manifestation of acceptance in respect of a clear offer, there is no binding agreement. Acceptance may be indicated by other ways, including conducting oneself in accordance with the offer itself.
It is not however enough for a mere offer and its acceptance to exist – there must also be consideration on both sides. In other words, the contracting parties must exchange promises, something that is often referred to as "value". A handshake in respect of for example the sale of property, is not legally binding unless the parties undertake to be bound to the conditions set out in the initial offer.
With the above in mind, if you shake on some deal without anything further, there is no binding contractual intention.
Why A Handshake Is Not Sufficient – Written Contract or Oral Agreement?
Though similar, verbal agreements and written contracts are two different things. Oftentimes, you may find yourself in a situation where a handshake sounds just fine. But then, you’d be surprised to find yourself in a dispute with someone you thought was on the same page as you when in fact, that’s not the case. While a handshake may constitute a legally binding agreement or verbal contract under some situations, it’s not always wise to trust their validity. A verbal agreement, whether they’re made in person or over the phone, is only as enforceable as the people making them. Let’s take a closer look at some of the cases where a written contract is necessary: Again, while verbal contracts can be legally binding, they always run the risk of misunderstandings that can be exploited. When making a business deal, having a signed contract that describes the transaction in detail reduces the chances of confusion and minimizes your liability. With this in mind, it’s important to know that there are several situations where written contracts are the standard and using verbal agreements runs the risk of leaving yourself on the hook for something you didn’t intend to be responsible for. Such issues may arise in the following situations:
Case Examples and Legal Precedents
Noteworthy in the area of handshake agreements, Detrick v. Horne, 162 S.W.3d 208 (Ark. Ct. App. 2004) involved a contract for the sale of land for a retail center that was not in writing. The court rejected the statute of frauds defense noting that handshakes and oral contracts were common in the context of real property transactions in the area. It held there was sufficient evidence that the parties "knew of the necessity of the written agreement." What’s more, since there was testimony that it was understood that nothing would change in the deal without mutual consent, the court held that this was "clear and convincing evidence of the parties’ clear intent not to be bound until a mutually satisfactory number of signatures were affixed to a written document."
Another noteworthy case involved Allison, Partee & Ellisor, Inc. v. Vega, 611 So. 2d 945 (Fla. Dist. Ct. App. 1992). Here, Vega, a shareholder in a closely held corporation, commenced an action against the other shareholders to enforce an oral contract for the sale of land to the company. The trial court granted Vega final summary judgment against the defendants on liability for breach of contract. The court of appeals reversed, finding that a handshake agreement was insufficient to satisfy the statute of frauds. In support of its decision, the court noted that a contract must comply with all applicable statutes, including the Statute of Frauds, and must be in writing and signed by the parties when "the contract … cannot be performed within the space of a year." Because the contract could not be performed within a year, it was subject to the Statute of Frauds, and Vega’s lack of a signed written contract prevented him from enforcing the agreement.
Enforcing a Handshake Deal: What You’ll Need
Proving Solvency and Capability to Perform: The ability to prove that a party has assets required to make the payments they may have agreed to (ex: a purchase of a piece of real estate, or other piece of property) and the ability to perform contractual promises (ex: to do remodeling work, dig up a foundation, or do something else in order to satisfy the contract) are two very important considerations that one has to consider when proving and enforcing a handshake deal.
Witnesses and Supporting Evidence: Witnesses may be considered dispositive even if they come forward at the last moment to assert what they heard. Even in addition to witnesses, other evidence, the more the better, is considered helpful in assessing whether an agreement was really made (or not made). With oral promises that can sometimes be very difficult to prove and/or enforce. Even when one party believes they "have a deal", it is always good practice to get the particulars of the deal in writing as soon as possible . Failing to do so, unless you’re darn sure that the deal is going to happen, can open up Pandora’s box of issues and liability if the deal doesn’t happen.
Practical Consequences of Desiring Legal Action: For a verbal agreement to be legally binding, there must be evidence of consideration (exchange of a benefit for detriment), and mutual assent. As stated above, that consideration is most often in the form of money. The existence of a distinct memory of an oral agreement, however, does not entitle a party to relief on alleged breach of contract against an unwilling party. The practical application of this fact and the practical difficulties of actually proving an oral agreement are considerations that need to be looked at closely especially when a handshake deal goes awry. In other words, unless there are way more cards stacked in your favor than risk, then it is not prudent to spend the money and time pursuing a court action on this.
Considerations For State Laws and Your Handshake Agreement
As with many legal questions, the answer is that it depends—specifically, on where you are located and what the case law (and statutory law) is in your particular state. Courts in the United States have expressed contradictory viewpoints about whether an oral agreement was sufficiently definite to be enforceable. For example, the US Court of Appeals for the 7th Circuit Halloran v. Ebasco Services, Inc. decision stated that "no reasonably prudent person, after having been offered a fifteen-minute job, would expect that its terms would not be agreed upon explicitly if either seriously contemplated relying on it." Yet, cases in other jurisdictions sully this clear position. In Prime Mover Services, Inc. v. City of Flint, the only putative contract term that was disputed by the parties was the interpretation of the proposal’s "not to exceed" clause, which was interpreted by the court as an unenforceable "agreement to agree." So while there are many general principles that govern whether or not a handshake agreement will be enforced in court, there are also many nuances that vary by jurisdiction, requiring a more personalized analysis.
How to Make a Handshake Deal More Binding
It’s helpful to put language in your handshakes and make verbal commitments into concrete action, but it can make your life easier if you do a few things that should strengthen the handshake deal. These things likely won’t offer you a lot of additional relief if it comes to breaking the agreement down the line, but it can help you show your good faith and strengthen your legal standing.
One is to write up the handshake agreement afterwards, showing that there was a mutual understanding of the agreement that was made. While the original point of a handshake was the agreement itself, putting it down on paper afterwards can give you additional legal recourse, especially if the other party breaks the agreement. If you agree on a sale of some sort, for instance , write up a contract afterwards and get signatures, hand over payment and leave with the item you agreed to buy. This will give you recourse if the seller later claims that they never agreed to such a deal, especially if there is any reconciliation of payment.
You can also have witnesses who are neutral get in on your handshake agreement. Within a corporate environment, this is automatically a capital consideration. If your boss shows up on a Tuesday and says "We had a handshake deal about your salary and numbers at the beginning of the year," you can trump that with witnesses. Have them join you for lunch with the client you’re striking a deal with, for instance. Not only does it show everyone that you’re organized, it shows that you’re serious about staying within the parameters of the agreement.
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