Handshake agreements or fist bumps?.

Society has always prided itself on honouring a handshake agreement. But, what happens when one of the parties shaking hands, is not honourable? Unless your handshake is backed with a written agreement, you might not have a proverbial leg (or hand) to stand on.

Developments in technology and changes in community behaviour during the COVID-19 pandemic have altered how these agreements are formed. The ease and convenience of forming agreements in videoconferences or messaging services is tempting. But these informalities can become a source of headaches and nuisance if things turn sour.

Here are 5 reasons why your handshake agreement should be formalised in writing:

1. Accountability

A written agreement holds the parties accountable. It sets out expectations and deliverables and creates certainty by detailing:

• what goods or services are to be supplied;
• timeframes for delivery;
• payment terms;
• rights and obligations of the parties;
• a framework of what happens when there is a breach, such as a party failing to deliver or pay.

2. No surprises

A written agreement creates trust and confidence between the parties. If a party is unwilling to sign a written agreement, then don’t be surprised if that party also fails to perform its obligations come crunch time.

3. Enforcement

Although an unwritten agreement can be enforceable, a written agreement is enforced more effectively.

It can be difficult, time consuming and costly to establish each party’s rights and obligations where there is a handshake agreement. It becomes a game of ‘he said, she said’ and Courts may be reluctant to enforce handshake terms, especially where these terms are unclear or incomplete.

4. Confidentiality

It is essential to maintain a duty of confidence. Any commercially sensitive information disclosed during negotiations or performance, must be kept confidential.

You can ask your counterparty to ‘keep things quiet’ however, if they share what they know with unauthorised parties, it will be difficult to hold them accountable for misusing confidential information. In written agreements, each party’s confidentiality obligations are commonly outlined, making it easier to enforce. Inadvertent disclosure can also be avoided by clearly defining what information is confidential.

5. Getting out of a hairy situation

A written agreement is an official record setting out the parties’ intentions. If a disagreement arises during the performance of a party’s duties, the aggrieved party can turn to the written agreement in order to resolve the dispute. Further, agreements commonly contain dispute resolution clauses which can be more cost effective than resorting to litigation.

We like handshakes

We’re not saying abolish the handshake altogether. It’s a great place to start (even if handshakes are replaced by fist bumps for the moment). However, having your intention reflected in an unambiguous written agreement will afford you much more certainty in business dealings.

Reach out to a Bespoke lawyer today and leave the writing to us, because remember: the devil is in the detail!