Some business owners consider using handshake deals simply because they are easy and efficient. Two business owners may already know each other and be on relatively good terms. They do not see the need to go through the formal process of writing a contract just to work together.
However, handshake deals create some potential legal issues. Below are two reasons why it is often better to use a written contract instead.
Reducing the odds of miscommunication
For one thing, the process of writing the contract means that the parties have to work together and review the terms. This helps reduce the odds that there will be some level of miscommunication. Often, disputes can be avoided in advance, simply by drafting a contract.
Potential miscommunications could include the deadline for the project, who will cover specific costs, how compensation will be provided and the general scope of the project. All of these details can be addressed in the contract to ensure that both parties are on the same page when they begin working together.
Making the contract easier to enforce
When disputes do arise, it is often very difficult to enforce a handshake deal. Both people may genuinely believe that different terms were agreed to and tell very different stories about what obligations or responsibilities they have.
The owner of a construction company may say that they were supposed to be paid upfront, for example, while the person who hired them claims they were supposed to be paid at the completion of the project. If these terms had been specified in a written contract, it would be easy to go back to the paperwork to find a resolution to the dispute.
Whether you are drafting contracts, navigating disputes or looking into your legal rights, it can be helpful to work with an experienced attorney.
