What Is Handshake Agreement? Is It Legally Binding?

Last updated on January 7th, 2024 at 09:18 pm

Is a gentleman’s agreement legally binding? How do you protect and prove a handshake agreement?

A gentleman’s handshake can be an easy way to have a pact or trust between two people or parties.

While such agreements have been historically considered binding based on trust and honour, their legal enforceability is a debatable subject.

In modern society where written contracts hold sway, is a gentleman’s agreement legally binding?

In this blog post, we will deeply look into handshake agreement also called a gentleman’s handshake, examining the factors that determine its validity and the potential challenges faced in enforcing it.

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Table of Contents

Handshake Agreement Meaning

A lady and a gentleman shaking hands in depiction of gentleman's handshake

A handshake deal is a verbal or informal agreement made between parties without any written documentation.

When contracts are concerned with legal intricacies, there exists a time-honoured tradition of sealing an agreement with a simple gesture of handshake upheld by mutual trust and honour.

While these informal pacts have historical significance and are often seen as a symbol of integrity, they lack the legal enforceability of formal contracts as we will see in this article.

This begs the question: Can a gentleman’s agreement truly hold legal weight?

The Historical Context of Trust and Honor in Handshake Agreement

The historical context of trust and honor in gentleman’s handshake can be traced back to ancient times when written contracts were not yet prevalent.

Agreements were often made and sealed through a simple handshake.

Gentleman’s agreement was primarily based on trust and honour, and the parties involved firmly believed in the weight and significance of a handshake as a symbol of their commitment.

These agreements were based on the belief that individuals would keep their word and honour their commitments.

Trust played an important role in this arrangement, as parties needed to trust each other to fulfill their obligations without any written documentation or legal enforcement.

Historically, honour and reputation were highly valued in many cultures.

Having a good reputation was essential for credibility and success in business and personal life.

Also Read: Qualities of a Gentleman

Breaking a verbal agreement would not only damage a person’s reputation but also jeopardize their integrity and trustworthiness.

Consequently, individuals were expected to honour their gentleman’s agreement to maintain their standing in the community and preserve their relationships.

Furthermore, in many pre-modern societies, the community played a vital role in regulating behaviuor and resolving disputes.

If someone breached a handshake agreement, it would not only affect their reputation but also harm their relationships with other members of the community and future endeavours.

Therefore, honouring a gentleman’s agreement was not only a matter of personal integrity but also an acknowledgment of the collective norms and values of a community.

The extensive use of verbal agreement began to diminish as societies evolved, legal systems became more formalized, and written contracts gained popularity.

The shift towards written contracts can be attributed to various factors, including the need for more complex and detailed agreements, the rise of commercial transactions, and the desire for legal protection in case of disputes.

Despite the decline in prominence, the concept of trust and honour in gentleman’s handshake continues to hold cultural and symbolic significance.

Even in modern times, a handshake can still be seen as a symbol of trust and a commitment to honour one’s word, although it is often accompanied by a written contract to provide legal protection and clarity.

Characteristics of Gentleman’s Handshake

A group of people putting their hands together in a demonstration of gentleman's agreement

The characteristics of a handshake agreement include a lack of formal documentation, reliance on verbal assurances, and the importance of trust, honour, and ethical commitments.

Let’s examine them in detail…

1. Lack of Formal Documentation

A gentleman’s handshake does not involve the creation and signing of written contracts.

Instead, they rely on mutual understanding and trust between the parties involved.

As a result, there is no formal paper trail outlining the terms and conditions of the agreement.

This lack of documentation can make it challenging to enforce the agreement or provide evidence of its existence in case of disputes.

2. Verbal Assurances and Non-written Nature

In a handshake deal, the terms and conditions of the agreement are discussed and agreed upon through verbal communication rather than written communication.

This verbal exchange of assurances, promises, and commitments is the foundation of the agreement.

It often relies on the parties’ ability to communicate and understand each other’s intentions and expectations.

Also Read: The Rustic Gentleman of Elegance

3. Trust, Honour, and Ethical Commitments

The agreement heavily relies on trust and the reputation of the parties involved.

In the absence of written documents, trust becomes the binding force in these agreements.

The parties rely on each other’s integrity, honor, and ethical commitments to uphold their promises and deliver on the agreed-upon terms.

However, it is important to note that while handshake agreement can be useful in certain situations, they have inherent risks due to their non-formalized nature.

The lack of written documentation makes it easier for misunderstandings to arise, and without legal evidence, enforcing the agreement can be challenging.

In many jurisdictions, the agreement may not hold up in court, making it crucial to exercise caution and consider alternative options such as written contracts for important and complex business arrangements.

Common Instances of Gentleman’s Agreement

Here are instances where a handshake deal is made. They are usually informal scenarios that are not threatening enough if someone violates their part of the deal.

1. Business and Trade Deals

Handshake agreements are often used in business and trade deals, especially in informal or less formal settings.

For example, during networking events, conferences, or industry gatherings, individuals may make an agreement or come to an understanding through a simple handshake.

This can include agreements on partnerships, collaborations, sales, purchases, or other business arrangements.

Recommended: Identifiable Signs of a Gentleman

While handshake agreements in business are not legally binding in most jurisdictions, they are seen as a professional commitment between the parties involved.

In some cases, they may be considered morally or ethically binding, and breaching such an agreement can harm one’s reputation and credibility in the business community.

2. Diplomatic and Political Negotiations

This type of agreement is also common in diplomatic and political negotiations.

When high-ranking officials, diplomats, or politicians meet, they often exchange handshakes as a sign of mutual respect and trust.

During these encounters, important agreements or understandings may be made, such as peace treaties, trade agreements, or diplomatic alliances.

In diplomacy, a gentleman’s agreement is generally regarded as a symbol of goodwill and commitment.

However, they are not legally binding unless they are confirmed, formalized, and signed through proper channels, such as treaties or formal agreements.

A handshake agreement in diplomacy is often the initial step towards more concrete negotiations and formalization.

3. Social and Personal Commitments

Unwritten understanding in agreements is not limited to professional or diplomatic settings but can also occur in social or personal contexts.

For example, friends agreeing on specific plans, commitments, or favours may seal their agreement with a handshake.

Similarly, in some cultural or traditional ceremonies, a handshake may signify a commitment or promise made between individuals or families.

In social and personal contexts, a gentleman’s handshake is usually seen as a sign of trust and sincerity.

Related: Who is a Gentleman of Leisure?

While they may not have legal ramifications, breaking such an agreement can strain relationships and lead to a loss of trust and credibility.

It is important to note that although handshake agreement carry symbolic weight, they lack the legal enforceability and protection provided by written contracts or formal agreements.

Therefore, it is generally advisable to formalize important agreements through written contracts to ensure clarity, protection, and legal recourse if necessary.

A handshake deal sealed

A contract is a legally enforceable agreement between two or more parties, which establishes rights and obligations that the parties are bound by.

For a contract to be legally binding, certain essential elements must be present.

These elements include an offer, acceptance, consideration, intention to create legal relations, capacity to contract, certainty of terms, and legal formalities (when applicable).

The Essential Components of a Legally Binding Agreement

The essential elements of a legally binding contract include the following:

1. Offer, Acceptance, and Consideration

The first element of a legally binding contract is an offer. An offer is a clear statement of willingness to enter into a contract on specific terms, made by one person to another.

It must contain all the essential terms that are necessary for creating a binding agreement.

Once an offer is made, the other party must accept it in order for a contract to be formed.

Acceptance is the unambiguous agreement to the conditions of the offer.

It must be communicated to the person who made the offer, and it must be made without any conditions or modifications.

Related: Five Challenges The Gentleman Must Surmount

Silence or inaction generally cannot be considered acceptance unless there is a pre-existing relationship between the parties or a course of dealing that suggests acceptance by silence.

Consideration is something of value that is tangible and exchanged between the parties. It can be a promise, an act, or forbearance.

Consideration is necessary in order to give the contract legal efficacy, making it enforceable by the courts.

It ensures that both parties have agreed to give up something of value and creates a reciprocal obligation.

For a contract to be legally binding, the parties must have intended to create legal relations by their agreement.

This means that they must have had a serious intention to enter into a legally enforceable contract, rather than merely expressing a mere intention or social agreement.

In commercial transactions, it is generally presumed that the parties intended to create legal relations.

However, in certain social or domestic relationships, there may be a presumption against legal intentions.

3. Capacity to Contract

Another essential element of a legally binding contract is the capacity to contract.

This means that the parties must have the legal ability to understand the nature and consequences of the contract they are entering into.

Minors, individuals with mental incapacity, and individuals under the influence of drugs or alcohol may lack the capacity to contract.

Contracts entered into by individuals lacking capacity may be voidable, meaning they can be avoided by the party lacking capacity.

4. Certainty of Terms

A contract must have certainty of terms in order to be enforceable.

This means that the terms of the contract must be sufficiently clear and certain for the court to understand what the parties have agreed to.

If the terms are too uncertain, the court may find that there is no valid contract.

The essential terms of a contract include the subject matter, price, quantity, and any specific terms that the parties have agreed upon.

In some cases, a contract may be subject to legal formalities in order to be legally binding.

These formalities include writing, signing, or witnessing, and they are required by law for certain types of contracts, such as contracts for the sale of land or contracts that must be in writing to meet the statute of frauds.

Is A Gentleman’s Agreement Legally Binding?

The lack of legal enforceability in a verbal agreement makes it hard to be legally binding.

A gentleman’s agreement is a non-binding agreement made between individuals or organizations based on trust, honor, and understanding.

It is not based on any formal legal framework and lacks enforceability in a court of law.

While such agreements are often used in business or social contexts as described above, they do not carry the weight or legal protection of a formal contract.

The following are the reasons:

1. The Challenge of Proving the Existence and Terms

Since gentleman’s agreement are typically oral or informal, it can be challenging to prove their existence and the specific terms agreed upon.

Without a written record, it becomes difficult to establish that an agreement was made in the first place.

This can lead to disputes and disagreement regarding the validity and interpretation of the alleged agreement.

In contrast, a formal contract, with its written terms and signatures, provides clear evidence of the understanding and intent of the parties involved.

In the absence of such documentary evidence, it becomes hard to demonstrate the existence and specifics of a handshake agreement.

One key reason why gentleman’s agreement lack legal enforceability is the absence of clear legal intent.

While parties may agree on certain obligations or commitments, they do not express a formal intention to be legally bound.

This is in contrast to a legally binding contract where the involved parties explicitly state their intention to create legal rights and obligations.

Without an expressed legal intent, the law generally assumes that the agreement is not enforceable.

Courts usually hesitate to intervene in matters that involve informal agreements.

They prioritize cases where legal rights and obligations are clearly defined in legally binding contracts.

However, it’s important to note that some agreements that started as gentleman’s agreement can later be converted into legally binding contracts if both parties willingly decide to do so.

This conversion usually requires the creation of a new formal agreement that reflects the intentions of the parties to be legally bound.

Pros and Cons of Gentleman’s Handshake

Pros

Flexibility and Informal Nature: Handshake agreement are often seen as more flexible and adaptable compared to formal written contracts. They allow parties to negotiate and come to an agreement without the need for lengthy legal documents, which can save time and energy.

Preserving Privacy and Confidentiality: It can provide a level of confidentiality and privacy since they are not public documents. This can be advantageous when dealing with sensitive or proprietary information that parties may not want to disclose to the public.

Fostering Trust and Building Relationships: They are built on trust and mutual understanding between parties. By forgoing formal legal contracts, parties demonstrate a level of trust and commitment to each other, which can help build strong and lasting relationships.

Cons

Lack of Legal Recourse in Case of Breach: One major drawback of verbal agreement is the lack of legal recourse in the event of a breach. Without a written contract, it becomes more difficult to prove the terms and conditions of the agreement, making it challenging to seek legal remedies for any violations.

Potential for Misunderstandings and Disputes: It often relies heavily on verbal communication, which can lead to misunderstandings and disputes. Without a written document to refer to, parties may have differing interpretations of the agreement, leading to conflicts that are difficult to resolve.

Impact on Reputation and Business Relationships: It can have a negative impact on a party’s reputation and business relationships if they are perceived as unreliable or untrustworthy. A breach of a handshake agreement can damage a party’s reputation, making it harder to establish or maintain business relationships in the future.

When Should Gentleman’s Handshake Be Used or Not?

When to Use Handshake Agreement

It is generally used in situations where a formal contract is not feasible or necessary.

Here are three specific scenarios where a handshake agreement is commonly appropriate:

Low-stake or Informal Matters

Such agreements are often used for matters that are of low importance or involve small transactions.

For example, borrowing a small amount of money from a friend or neighbor, agreeing to do a favor for someone without compensation, or making a simple trade or exchange can all be settled with a this type of agreement.

In these cases, the simplicity and informality of gentleman’s agreement are sufficient, as the risks or consequences involved are minimal.

Preliminary or Exploratory Negotiations

It can be used as a starting point for negotiations or discussions.

When two parties are unsure about entering into a formal contractual relationship but want to test the waters or explore potential opportunities, a handshake agreement can be a useful tool.

It allows both parties to agree temporarily on certain terms or conditions, while they continue to evaluate the feasibility and trustworthiness of each other.

Establishing Trust Before Formal Contracts

It can also be utilized in situations where parties are building a relationship of trust before moving forward with formal contracts.

By initially relying on a handshake deal, parties can assess each other’s integrity, reliability, and ability to fulfill commitments.

This informal arrangement helps establish a foundation of trust, which can then serve as a basis for more extensive and binding agreement in the future.

When to Avoid Handshake Agreement

High-Stake Business Deals

In high-stake business deals, it is crucial to avoid this agreement type and instead formalize the agreement through legal documents.

Such deals involve significant financial investment, potential risks, and long-term commitments.

A non-binding agreement may lead to misunderstandings, disputes, and difficulties in enforcing the agreed terms.

By using legally binding contracts, parties can clearly define their rights, obligations, and remedies in case of any breach or dispute.

This ensures all parties are on the same page and minimizes uncertainties.

Complex and Sensitive Arrangements

Complex and sensitive arrangements, such as partnerships, joint ventures, or mergers, require careful consideration and detailed documentation.

The agreement lacks specificity and may not adequately address all aspects of the arrangement, leaving room for disagreement or misinterpretations.

By avoiding non-binding agreements and using comprehensive legal contracts, parties can outline all terms, conditions, confidentiality requirements, dispute resolution mechanisms, and other critical aspects pertinent to the arrangement.

This helps safeguard the interests of all parties involved.

In various industries, businesses have legal obligations and must comply with governmental regulations.

A gentleman’s agreement may not fully account for these legal requirements and can expose the parties to significant legal risks.

By formalizing agreements and incorporating necessary legal clauses, parties can ensure adherence to laws, regulations, and compliance obligations.

This helps protect each party’s legal rights, mitigates potential penalties or liabilities, and strengthens their position in case of any legal scrutiny or disputes.

Formalizing Gentleman’s Agreement: Turning Trust into Legally Binding Contracts

Two parties converting a handshake agreement to a legal contract

Here are ways to make a handshake agreement binding:

Drafting a Clear and Comprehensive Contract

The first step in transforming a gentleman’s agreement into a contract is to draft a clear and comprehensive document that outlines all the terms and conditions of the agreement.

The contract should include details such as the names and addresses of both parties, a description of the agreement, terms of payment, duration of the agreement, responsibilities of each party, and any other relevant clauses specific to the agreement.

It is important to be thorough and cover all aspects of the agreement to avoid any potential misunderstandings or conflicts in the future.

Once the contract is drafted, it is highly advisable to seek legal advice and have the document reviewed by a qualified attorney.

A legal professional can ensure that the contract complies with all applicable laws and regulations, protect the interests of the parties involved, and guide on potential risks and liabilities.

Legal advice can help identify any loopholes or ambiguities, thereby strengthening the contract and making it more enforceable.

The next step is to obtain signatures and consent from all parties involved in the agreement.

Each party should carefully review the contract and, if satisfied with its terms, sign the document to signify their agreement and intention to be legally bound by its provisions.

It is crucial to ensure that all signatures are obtained before commencing any activities based on the agreement.

Additionally, if there are any witnesses to the signing, their signatures should also be obtained to further strengthen the contract’s validity.

Benefits of Converting Gentleman’s Agreement to Formal Contracts

One of the primary benefits of transforming a handshake agreement into a formal contract is the legal protection it provides.

A formal contract is legally binding and enforceable in a court of law.

In case of a dispute or breach of contract, having a written document significantly increases the parties’ chances of obtaining legal remedies and seeking compensation.

Clarity of Terms and Responsibilities

A formal contract ensures clarity regarding the terms and responsibilities of each party.

By clearly defining the obligations of both parties, disputes and misunderstandings can be mitigated.

A well-drafted contract outlines the rights, duties, and expectations of each party, ensuring that everyone involved is on the same page.

Mitigating Risks and Ensuring Accountability

A formal contract helps mitigate risks by addressing various potential scenarios and outlining appropriate actions in case of unexpected events or breaches of the contract.

It provides a framework to resolve disputes and make decisions.

Moreover, a formal contract ensures accountability by clearly defining the consequences of non-compliance or breach of contract, discouraging any party from deviating from their obligations.

Conclusion

Handshake agreements or gentleman’s agreements, while lacking formal legal documentation, have been historically recognized as morally binding contracts.

These agreements rely heavily on trust, integrity, and goodwill between parties to honor their commitments.

Although not legally enforceable, they serve as a reminder of the importance of word and honor in business and personal relationships.

However, it is crucial to exercise caution and consideration when entering into a gentleman’s agreement, as the absence of legal backing may lead to potential disputes or misunderstandings.

Therefore, individuals must make informed decisions, understand when a formal contract is necessary to safeguard their interests, and ensure clear communication and expectations are established.

Frequently Asked Questions

What is a gentleman’s agreement?

It is an informal and unwritten understanding between parties, often sealed with a handshake, based on trust and honor. While not legally binding, it relies on the parties’ integrity to uphold their commitments.

Who created the gentleman’s agreement?

As a historical practice, the gentleman’s agreement was not the invention of any single individual, but rather an evolution of traditional verbal commitments and a reflection of cultural norms that valued personal honor and trust in business and social interactions.

Today, while the practice persists in some informal settings, formal contracts and legal agreements have largely replaced them in modern business and legal dealings.

When did the gentlemen’s agreement start?

The gentlemen’s agreement has historical origins dating back centuries, with informal agreements based on trust and honor. The term gained prominence in the 19th and early 20th centuries, associated with gentlemen’s verbal arrangements sealed with a handshake.

Is a handshake deal legally binding?

A handshake deal is not legally binding. Unlike formal contracts that require specific legal elements to be enforceable, handshake agreements rely on trust, honor, and verbal understanding between parties.

Is a handshake an agreement or contract?

A handshake is a gesture that often accompanies an agreement, but by itself, it does not constitute a contract. An agreement involves mutual understanding and consent of parties, and a handshake can symbolize that understanding.

What happens if you break a gentleman’s agreement?

If you break a gentleman’s agreement, there is typically no legal recourse, as it lacks formal enforceability. However, it may damage trust, reputations, and relationships, leading to potential social or business repercussions.

How do you prove a handshake agreement?

Proving this agreement in a legal setting can be challenging due to its informal and non-written nature. To establish the existence and terms of a handshake agreement, the following steps might be helpful:

  • Gather Witnesses: If there were any witnesses present during the agreement, their testimonies can support the claim.
  • Documentary Evidence: Look for any related emails, text messages, or documents that refer to the agreement or its terms.
  • Conduct and Actions: Demonstrate that both parties acted by the alleged agreement, as their actions can be indicative of an understanding.
  • Verbal Testimonies: If possible, have the parties involved in the handshake agreement provide sworn statements or testimonies confirming the arrangement.

References:

https://enable.com/blog/why-handshake-deals-cant-always-be-trusted#:~:text=A%20handshake%20deal%20is%20an,confirming%20the%20details%20agreed%20upon.

https://www.steadfastnz.nz/well-covered/insurance-for-starting-out-business/the-danger-of-handshake-deals

https://artiusman.com/blogs/complete-man/175866951-what-is-a-gentlemens-handshake-agreement