Are Handshake Agreements Binding?
Are Handshake Agreements Binding?
As a general rule, the law does not necessitate most agreements to be in writing to be enforceable, so are handshake agreements binding? A verbal contract or a handshake agreement may be just as enforceable as a written contract. Verbal or handshake contracts are subject to the same principles of contract law that apply to written contracts.
There are several critical exceptions to this rule, however. Many states have now adopted a statute of fraud requiring certain forms of contracts to be in writing for them to be enforceable. In most states, the written contract should include the signature of the person sought to be bound by the contract. While the specifics may differ from state to state, most statutes of fraud subject the following types of contracts to be in writing form:
- A promissory note to pay the debt of another person,
- Any contract involving a disposition, sale, or transfer of the real estate, including leases
- Any agreement cannot be performed within a year.
Again, contract law requirements will vary from state to state. To determine whether a given verbal or handshake contract can be enforced, you should consult a professional Contract attorney who is competent and experienced in the contract law of the state in which you live.
Written or Oral?
Finally, while verbal contracts and handshake agreements may be enforceable, attorneys do not advise their clients to do business in this manner. Written contracts are far better because they guarantee the parties certainty as to the exact terms of the contract or agreement. More importantly, written contracts help prevent unscrupulous or dishonest parties from later claiming the terms were different.
A binding, legally enforceable agreement or contract can be in writing or oral.
Oral contracts are agreements that have been made orally, but not written. Depending on the nature of the business or deal, a certain form of contract in Florida must be in writing, according to Florida law, in order for them to be enforceable. For instance, contracts that cannot be performed within one year, and contracts related to the sale of real estate must be in writing.
Generally, other than those required by law to be in writing, handshake agreements are binding and oral contracts are legally enforceable in Florida, especially in situations where one party has already performed the obligations of the handshake contract.
Written contracts are always preferable to oral contracts because a written contract helps eliminate disputes about the terms, warranties, and conditions of the agreement. Also, oral contracts can be challenging to enforce in a court of law. To avoid ugly contract disputes and lawsuits, the best practice is to get an agreement in writing. Written contracts will help ensure that parties understand their obligations and rights under the contract.
However, even a written contract should lay out the agreement between the parties with enough specificity to make it enforceable. Under Florida law, contracts subjected to a written format must contain the parties’ agreement on specific issues in order to be enforceable. A contract attorney can help you determine what should be in your written contract to render it legally binding and enforceable in a Florida court.
What are Legally Binding Contracts?
A contract is an agreement between parties or legal entities in which one party agrees to provide goods or perform a service in exchange for the payment of money or other goods or services.
The formation of a contract is complete when there is an offer and acceptance between the parties of the exchange of "consideration." This offer and acceptance are sometimes known as a "meeting of the minds" or "mutuality of assent."
If the parties fail to reach a threshold level of agreement by these standards, then there exists no enforceable contract. However, an agreement, even after an offer and acceptance, is not essentially a legally binding contract. For instance, one cannot contract for an impossible or illegal act.
In addition, in order to be a party to a legally binding contract, you must have the capacity to enter into that contract. For example, with some exceptions, minors lack the capacity to enter into a contract. For a contract to be enforceable or binding, there also must be the exchange of promises to act and/or provide goods, services, or money.
The act, promises, services, goods, and/or money are called "consideration." In order to have an enforceable contract, there must be an exchange of consideration. In addition, an agreement to do something or pay for something can become binding and enforceable if you act to your detriment while solely relying on the other party’s promise to perform. Similarly, in some cases, giving up the right to act in reliance on a promise made by the other party may be sufficient consideration for a binding, legally enforceable contract.