By Joseph Wapelhorst, Staff Writer
Handshake deals have become a thing of the past. No longer can business owners rely on honesty, integrity and personal bonds to ensure good business practices. In order to protect yourself from fraud, scams, and unpredictability, a written contact is an absolute necessity in the modern world, and the law agrees.
Handshake deals are also known as oral or verbal contracts, which can be a binding agreement recognized by the law. So why would these not carry enough weight in a court of law? Because they can’t always be proven with evidence beside someone’s word. While written and oral contracts are both binding, the burden of proof to show that an oral contract existed is quite high and easy for those trying to avoid keeping to his/her obligations to challenge.
Handshake agreements can be defended in court by eye-witnesses to the agreement and testimony to show that each side began immediately to carry out the contract’s terms. A person or business suing to enforce a verbal contract can also support their claims by showing a history of communications between both sides, either verbal, or by email or text message, that show the details of the deal, though this could result in a string of unanswered messages. Most difficult of all, once in court with whatever evidence you may have pieced together, the burden is on the wronged party to prove a deal existed.
Anyone looking to do a handshake deal must also be aware of the particular laws covering contracts and verbal agreements. If a person takes all available steps to prove that an oral agreement took place and to clarify its terms, in order to have evidence in case of a court battle, they may still lose their case because of laws requiring written agreements in certain cases. For example, real estate contracts are almost always legally required to be written. Even the strongest cases supporting an oral agreement would fail due to the statutes governing real estate.
Taking these glaring disadvantages to oral agreements into consideration, it’s undeniable that the best path is a written contract with clearly defined terms. Any lawyer would recommend a written contract, not only because they are more binding, but because they address and settle important, contentious issues before obligations and expectations are set.
One of the most important things to settle with a written contract is of course payment. Even those who think that an oral agreement is sufficient for payment must consider what happens if a payment is not made in a timely manner? How do you collect? Are there consequences for late payment? Will you have to hire a lawyer? Typical contracts very clearly outline interest rates or late payment fees, as well as paying attorney’s fees. The idea is motivate timely transactions, as well as protecting a party’s rights.
Similarly, written contracts are critical in providing timelines for goods and services to be exchanged. With an oral agreement, a great deal of uncertainty hangs around the question of whether the deal has been violated. Delays or a deliberate lack of communication may seem like bad faith or even fraud, but it will take time and unnecessary legal fees to know for certain. Written contracts provide timelines for work to be done, payment to be issued, and other terms to be met. Legal challenges are then simplified and streamlined due to the clarity provided by written timelines.
Oral agreements most of the time collapse under the weight of details. Deadlines, late fees, interest rates, communications, and other detailed questions arise once the partners shake and must be answered after an agreement has been reached with each side potentially expecting different answers. If you prefer the informality of a handshake deal for very small-sized agreements, it may be worthwhile. But for agreements big or small, any lawyer will without a doubt recommend something in writing, to outline details, provide protocols for violation of terms, and ensure clarity and cooperation between both parties. When it comes to anything affecting your business or finances, always get it in writing.
Staff Writer Joey Wapelhorst is a recent graduate of Fordham University where he studied Political Science and Accounting with a focus on Constitutional Law and American Government. He is currently choosing where to attend law school in the Fall.