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Are handshake deals enforceable in Texas?

On Behalf of | Apr 7, 2023 | Business Litigation

A handshake deal is just another word for a verbal agreement. Two business professionals discuss how they can work together and, rather than drafting a contract, they just shake hands and agree to move forward with their plan.

Many people use handshake deals because they are fast and easy. They may also use a handshake deal because they simply trust the other person and have a good relationship with them. There are even cases where they may feel like it is insulting to ask for a written contract.

You can use a handshake deal in Texas, and there are situations in which these can be legally binding and enforceable. However, they do not come without risk. The first element of risk is that these are not always enforceable, so a deal that has been improperly executed may not actually hold up. But the potential risks associated with this approach go far beyond that.

You’re placing a lot of trust in the other individual

Generally speaking, it’s always good to document as much as you can when working with another business. This documentation gives you proof of agreements that were made, and it can help you if a dispute ever arises.

If you have a handshake deal, you simply have to trust that a dispute will not arise or that the other person will always be honest. Ideally, this will be true. But anyone who has been in business for a while knows that that’s not always the case.

For example, say that you have a handshake deal to get parts and materials from a supplier. They fail to come through, costing your company a lot of money. What if they simply deny that you ever had a deal in the first place? Or maybe they agreed that you had a deal, but they lie about when it was supposed to be fulfilled. You know that they’re not being honest, but how do you prove that in court? It can be impossible when all you have to go on is a verbal agreement.

Of course, disputes happen even when written contracts are executed. As a result, anyone who is suffering negative effects as a result of a breach of contract need to be sure that they know about all their legal options. Connecting with an experienced legal professional can be a great first step forward.