Handshake Deals: Are They Valid?

“Let’s shake on it” might still seem like one way to do business, but in the big and complex world in which we live, handshake deals are not getting much of a shake anymore. In Florida, like the rest of the country, there are a few contracts that by law must be in writing, but most contracts do not have to be writing to be valid and enforceable.

Like any contract, to be enforceable the handshake deal must have an offer that is accepted in exchange for some form of compensation. The problem with handshake deals and other oral contracts though is that it can be exceedingly difficult to prove their existence, let alone that the three necessary elements to make a contract valid were there at the time the contract was made. Written contracts have an advantage over handshake deals in this respect in that their very existence is proof that there was a “meeting of the minds.”

One of the main contracts that are specifically prohibited from being handshake or oral contracts are real estate contracts. In Florida, the Statute of Frauds requires that real estate deals be executed in writing – although it is possible for the parties to orally reach an agreement, shake on it, and then memorialize the understanding in a written contract that is signed by both parties. Only a written contract signed by both parties can be enforced in a Florida court.

For handshake deals and oral contracts outside of the real estate sales context, the party seeking to enforce the contract will almost always have an uphill battle to prove the agreement existed at all. This is where written communication and witnesses can come in extremely handy. While neither can take the place of a written contract, both can be used to prove the existence of an agreement. For example, if two parties meeting at a public conference within earshot of others or (even better) along with others agree to a deal, the witnesses to the deal can be called to testify as to what they heard and saw. E-mails sent by one party to the other seeking to enforce the agreement can also be valuable in proving the existence of the agreement and its terms.

Given the numerous obstacles that a party seeking to enforce an oral contract will face, the best way to proceed if there is an oral agreement is to have it reduced to writing. This means the agreement is written down, the parties agree to its terms, and both indicate their agreement (usually by signing). This simple act can save a great deal of difficulty and litigation expenses down the road.

Consider also that it is very possible to find yourself in an oral contract without realizing it and certainly without recognizing that it really needs to be put into writing. In this situation, it is best to look at the value of the contract – is it for a $5 purchase or a guarantee that a warranty for tens of thousands of dollars will be honored? The more the contract is worth, the more wary you should be of not getting something in writing to memorialize the parties understanding.

This is also an excellent time to seek out legal advice from a qualified and experienced business attorney who can assist you with evaluating the situation and, if need be, turning the oral contract into a written one. The Trembly Law Firm provides these services as well as numerous others for your business. Give us a call today to see how we can help at (305) 431-5678.