Are handshake agreements binding?
As a general rule, the law does not require most agreements to be reduced to writing to be enforceable. A verbal contract or a handshake deal may be just as enforceable as a written contract. Verbal or handshake agreements are subject to the same contract principles that apply to written contracts.
There are several important exceptions to this rule, however. Many states have adopted a statute of frauds that requires certain types of contracts to be in writing in order to be enforceable. In most states, the written contract must include the signature of the person sought to be bound by the contract. While the specifics may vary from state to state, most statutes of frauds require the following types of contracts to be in writing:
- A promise to pay the debt of another person,
- Any contract that involves the sale, disposition or transfer of real estate, including leases, and
- Any agreement that cannot be performed within one year.
Again, contract law varies from state to state. To determine whether a given verbal contract or handshake deal can be enforced, you should consult a lawyer who is familiar with the contract law of the state in which you live.
Finally, while verbal contracts and handshake deals may be enforceable, lawyers do not normally advise their clients to do business this way. Written contracts are usually far better because they provide the parties with certainty as to the exact terms of the agreement. More importantly, written contracts help prevent dishonest or unscrupulous parties from later claiming the terms were different.
Please Note: Rabin Kammerer Johnson provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please contact one of our attorneys.