A handshake deal is fast and simple. You may trust the other person, so you believe they will abide by what they are saying. In fact, you may even feel like it is insulting to ask for an official contract.
For instance, maybe you run a small business and you are looking for a new supplier for parts, materials, ingredients or something of this nature. You find another local business that can meet these needs, and you sit down with the owner. They say they would be happy to work with you. But is accepting a handshake deal enough?
It is very difficult to prove later
Many business owners do this because they just hope that everything will go well. If it does, the handshake deal can work.
But if problems arise, then things can get very complex. After all, you have no record of what was said. It can be incredibly difficult to prove that any agreement was in place or what the terms looked like. It creates a “he said, she said” situation.
For example, maybe your new parts supplier misses a critical deadline and your business loses a $100,000 contract. You want to sue for compensation. But the other business owner says that they were never informed of the deadline. If you do not have a written contract, how do you prove that they actually violated the agreement and cost your business money?
These types of legal disputes can become very complex. Take the time to carefully look into all of your rights so that you know how to proceed.