In the modern business context, it is unusual to see major deals made without being put in writing. However, there are still holdouts, and both handshake agreements and verbal agreements still exist.
As a New York Times writer commented in 1997, handshakes are a “big reason the airline industry does not feel threatened by the rise of videoconferencing. ‘You can’t fax a handshake’ is a popular saying at many companies.”
Whether over lunch, on the golf course, or at a networking event, some business deals continue to be reached under the adage of “let’s shake on it.” In this article, we help you navigate the world of “handshake agreements” and oral contracts under the laws of the State of Texas.
Suing Without a Written Contract
Under Texas law, a “breach of contract” can occur with a handshake contract or an oral agreement just like it can with a written contract. The elements of a breach of contract claim are:
- The existence of a valid contract;
- Performance by the plaintiff;
- Material breach by the defendant;
- Damages sustained by the plaintiff as a result of that breach.
For a contract to be valid, there must be offer, acceptance, and consideration. Consideration is a legal exchange of something of value between the parties to seal the deal. Consideration can also be the foregoing of a right to do something or not do something by one or both of the parties.
A classic example taught in law schools involves a contract where a man paid his nephew not to drink any alcohol for a period of time, hoping the nephew would become more serious in business. Because the nephew could legally drink, his giving up this right held up as valuable consideration.
The parties must have “mutual assent” to be in a contractual relationship, meaning that one can’t be a minor, incompetent, or otherwise lacking in capacity. The parties must achieve a “meeting of the minds,” meaning they agree on all key terms in the contract.
With or without a writing, if these elements can be proven, a plaintiff who feels a lawful contract has been breached has the right to bring breach of verbal agreement or breach of handshake agreement claim before the Texas Justice Court if the claim is for less than $10,000, and before the Texas District Court if the claim is for more than $10,000.
For help from a trusted breach of contract attorney in Houston, contact the Law Offices of Seth Kretzer today!
Handshake Contracts
Handshake contracts are at least theoretically capable of satisfying all the elements of a valid contract without being written down. However, since the terms are not recorded, handshake contracts are often more difficult than written contracts to enforce.
The terms of a handshake business deal may be vague, unclear or not fully hammered out at the beginning of the agreement. Often, the parties in a handshake deal don’t plan to cover all the eventualities that will occur. For this reason, some of the terms originally agreed to in a handshake may become impossible or impractical.
Additionally, parties may want changes later that no mechanisms are in place to allow for. For these reasons and others, handshake contracts, though enforceable, tend to break easier than written agreements, and sometimes with little or no bending.
What Is a Handshake Agreement?
A handshake agreement is an agreement between parties that is not recorded in writing. Like other contracts, it involves an offer by one party, an acceptance by the other party, and consideration exchanged between the parties, which must be something of value.
Generally, in a handshake agreement, the acceptance of the offer is signified by physically shaking hands, as opposed to signing on the dotted line.
In the old west, as made popular by the HBO show Deadwood, handshake agreements were sometimes sealed with a “spit swear,” where parties spit into their hands before shaking. This method was considered the more civilized version of an earlier “blood oath” in Europe.
In the late 1990s, the New York Times noted that the practice was declining for health reasons and that in modern society a person’s “word” was becoming enough at the time of the handshake, without additional symbolic gestures.
Is a Handshake Legally-Binding?
Does a handshake constitute a contract? Handshake contracts may be able to fulfill all the elements of a valid contract without being written down. Like other contracts, a handshake agreement involves an offer by one party, an acceptance by the other party, and consideration exchanged between them, which must be something of value.
Note that certain types of contracts in Texas must be in writing under a Texas law called the Statute of Frauds. For these types of agreements, a handshake will not form a legally binding contract.
Contracts that must be in writing include:
- Agreements for the sale or transfer of land or real estate;
- Leases and commissions for oil and gas drilling;
- Agreements where the terms outlast the lifetime of one of the parties (such as copyright);
- Agreements that will take longer than a year to perform;
- Agreements for the sale of goods that have a value of over $500;
- Agreements related to marriage or divorce;
- Agreements involving a promise to pay someone else’s debt (surety contracts).
Requirements for a Legally-Binding Handshake Contract
There are four basic elements to a legally-binding handshake contract:
- Offer –An offer must be made by one party.
- Acceptance –The terms of the offer must be accepted by the other party.
- Meeting of the minds –Both parties must have an understanding that an agreement has been formed and freely consent to the terms of the agreement, meaning neither party was coerced, under duress or undue influence, or victim of misrepresentation. To fully consent, neither party can lack the capacity to contract – such as being a minor or suffering from a mental, emotional or psychological condition that prevents them from being of sound mind and judgment.
- Consideration –The agreement must involve an exchange of consideration, or something valuable, between the parties. Consideration can be money, or the right to take an action or forbear from taking an action.
The agreement must also have a lawful purpose, i.e., the parties can’t contract to commit a crime or otherwise break a law. The terms must be certain, and cannot be vague, incomplete, or mistaken/misrepresented.
What Is an Oral Contract?
An oral contract, also known as a verbal agreement, is an agreement between parties that is not recorded in writing. Like other contracts, it involves an offer by one party, an acceptance by the other party, and consideration exchanged between them, which must be something of value.
Generally, in an oral contract, the acceptance of the offer is signified by the accepting party making a verbal promise, as opposed to signing a document.
Is a Verbal Agreement Legally-Binding?
Verbal agreements, like handshake agreements, can satisfy all the elements of a valid contract without being written down. Like other contracts, a verbal agreement involves an offer by one party, an acceptance by the other party, and consideration exchanged between them, which must be something of value.
Note that certain types of contracts in Texas must be in writing under Texas law. Verbal agreement laws do not permit these types of contracts from being spoken; anything less than a writing signed by both parties simply will not do.
Contracts that must be in writing include:
- Agreements for the sale or transfer of land or real estate;
- Leases, and commissions for oil and gas drilling;
- Agreements where the terms outlast the lifetime of one of the parties (such as copyright);
- Agreements that will take longer than a year to perform;
- Agreements for the sale of goods that have a value of over $500;
- Agreements related to marriage or divorce;
- Agreements involving a promise to pay someone else’s debt (surety contracts).
Requirements for a Legally-Valid Verbal Contract
There are four basic elements to a legally-binding verbal contract:
- Offer –An offer must be made by one party.
- Acceptance –The terms of the offer must be accepted by the other party.
- Meeting of the minds –Both parties must have an understanding that an agreement has been formed and freely consent to the terms of the agreement, meaning neither party was coerced, under duress or undue influence, or victim of misrepresentation. To fully consent, neither party can lack the capacity to contract – such as being a minor or suffering from a mental, emotional or psychological condition that prevents them from being of sound mind and judgment.
- Consideration –The agreement must involve an exchange of consideration, or something valuable, between the parties. Consideration can be money, or the right to take an action or forbear from taking an action.
The agreement must also have a lawful purpose, i.e., the parties can’t contract to commit a crime or otherwise break a law. The terms must be certain, and cannot be vague, incomplete, or mistaken/misrepresented.
How to Prove a Verbal Agreement in Court
Do verbal agreements hold up in court? It depends.
For a verbal agreement to hold up in court, a plaintiff alleging breach has the “burden” of showing the contract existed. Without the traditional written contract, such proof may include proof of performance of work, any e-mails, texts or other communications exchanged between the parties confirming the contract, and statements from witnesses who watched the parties form their contract.
Suing for Money Owed? Get the Judgment You Deserve with Help from Seth Kretzer
If someone has breached a handshake agreement or an oral contract with you, you will need a Texas lawyer who can help you gather all critical evidence that the contract existed and who knows handshake contract law and verbal contract law. Contact Seth Kretzer online today to schedule a free consultation.
Seth is on your side and knows how to help you recover damages on a breach of verbal contract or breach of handshake contract. He has the experience needed to sue for breach of handshake contracts, breach of verbal contracts, and for suing for money owed without a written contract in place. Once your judgment is secured, Seth Kretzer can act as your judgment collection attorney in Houston and will work to swiftly recover what is rightfully yours.
Attorney Seth Kretzer works tirelessly to understand your situation and will do everything in his power to help you!
