Are handshake agreements legally binding?
When does a contract have to be in writing?
By Nadia Cabrera-Mazzeo, Esq.
Short Answer: Handshake agreements are sometimes legally binding but they are hard to enforce.
The truth is, handshake agreements can be legally binding! However, if the other party breaks their promise, it can be difficult to enforce the oral contract and prove to a court that the handshake agreement met all the elements of a legally enforceable contract.
“statute of frauds”
Also, in many common situations where people enter into agreements, the law requires that it be in writing. This is known as the “statute of frauds,” which says that the following situations require that a contract be in writing:
A contract for the sale of goods worth more than $500;
An agreement that will take more than one year to complete;
A contract for the sale or transfer of land/ real estate;
Prenups or other agreements made in consideration of marriage; and
Promises to pay someone else’s debts.
As always in the law, there are exceptions.
Some contracts that would normally require a writing can still be enforced without one. These exceptions do not apply to every circumstance so it is important to consult with an attorney about your unique situation.
Specialty Manufactured Goods – when an oral contract is made to purchase custom-made items that can be identified and linked to the specific special order.
Written Confirmation Between Two Merchants – when a business sends another business a written invoice with the details of the verbal order.
Admission in Court – when a party admits under oath that there was contract.
Partial Performance – when one party takes significant steps to begin performing a contract for the sale of goods or real estate.
Promissory Estoppel – when one party reasonably relies on a promise to their detriment.
In summary, there are plenty of situations in which a handshake or oral agreement can be enforced, but it is certainly a risk to go all the way to court only to find out that a broken promise will stay broken. Even if a promise is enforceable, the legal fees might outweigh the amount of recovery.
It is best practice to write down important agreements, sign them properly, and set clear expectations for everyone about how the deal is supposed to play out and what to do if things don’t work out as expected. Honest Contracts can create a custom contract for your unique situation to ensure that you get what you bargained for.
Law office of Nadia Cabrera-Mazzeo, Esq.
Based in Taos, serving clients throughout New Mexico
505 427 2025
nadia@honestcontracts.com
