Relying on a handshake deal might seem like a sign of trust, but in reality, it can leave your business vulnerable to serious risks. When relationships are good, it’s easy to assume everything will run smoothly, but as soon as money, expectations, or responsibilities come into question, an informal agreement can quickly become a problem.
Many entrepreneurs prefer to keep things casual, avoiding paperwork and legal costs. But if you’re wondering ‘can I rely on a handshake deal?’ the short answer is no. Without a written contract, your business is exposed to disputes, lost revenue, and even legal complications.
What is a handshake deal?
A handshake deal is an agreement made verbally, often based on mutual trust. These informal agreements frequently happen between long-standing business partners, friends, or when there’s pressure to move quickly.
The problem is that verbal agreements are open to interpretation, difficult to prove, and can create significant legal and financial issues if things go wrong.
Why you can’t rely on a handshake deal
If you’ve ever asked ‘can I rely on a handshake deal?’ the risks below should make you think twice before entering into an agreement without putting it in writing.
- Unclear expectations
Without a formal contract, both parties may have different understandings of what was agreed. One person might think delivery times are flexible, while the other expects strict deadlines. A written agreement removes ambiguity and prevents misunderstandings.
- No legal protection
If a dispute arises, enforcing a handshake deal is difficult. Without written proof, it becomes your word against theirs. Even emails or messages confirming terms can be weak compared to a properly drafted contract.
- Payment disputes
One of the most common issues with handshake agreements is non-payment. If terms aren’t clearly documented, you may struggle to chase invoices or protect yourself from unexpected charges. A contract should set out pricing, payment deadlines, and penalties for late payment.
- Intellectual property risks
Handshake deals can mean that ownership of work isn’t always clear. If you hire someone to create software, branding, or content and don’t formalise the ownership in writing, they may retain rights to the work, which can cause problems later.
- Scope creep
We’ve all suffered from scope creep that this is even more prolific if your agreement is based on a verbal agreement. These can often lead to misunderstandings about what is and isn’t included. If expectations aren’t clear, you may find yourself delivering more work than planned, leading to additional costs and delays.
- No exit strategy
Business relationships sometimes need to end, but a handshake deal doesn’t provide a clear way out. A contract should define notice periods, termination clauses, and the process for ending the agreement fairly.
Protecting your business while maintaining trust
If you want to avoid the risks of handshake deals but still keep your business relationships strong, here’s how to protect yourself without unnecessary complexity:
- Use simple, clear contracts
Contracts don’t have to be long or full of legal jargon. A straightforward agreement that sets out key terms can be enough to protect you while keeping things efficient.
- Get everything in writing
Even if you don’t have a formal contract, always confirm key terms in writing. A follow-up email outlining what was agreed is better than relying purely on memory.
- Define payment terms
Set out how and when payments will be made, including penalties for late payments and clear invoicing procedures.
- Protect intellectual property
If work involves intellectual property, make sure your agreement clearly states who owns the final product and what rights each party has.
- Include a dispute resolution clause
Disputes happen even in good business relationships. A contract should outline how disagreements will be handled to prevent costly legal battles.
- Use contract templates
If you regularly make agreements of a similar nature, work with a lawyer to create templates that you can quickly adapt for different clients or suppliers.
When legal support is essential
For small or low-risk agreements, a simple written contract may be enough, but for high-value or complex deals, legal input is invaluable. Investing in proper contracts upfront can save you time, stress, and money in the long run.
At Jamieson Law, we help businesses create tailored agreements that protect their interests without unnecessary complexity. If you’ve been asking ‘can I rely on a handshake deal?’ and want to ensure your business is legally secure, get in touch for a discovery call.
Final thoughts
Handshake deals might feel convenient, but they come with serious risks. Trust is important in business, but it should never replace clear, written agreements. Having a properly drafted contract in place means you can focus on growth and opportunity, knowing your business is protected.
If you’re ready to move away from informal agreements and put proper contracts in place, reach out to our team to discuss how we can help.
