A handshake deal may feel natural. Perhaps you are a small business owner, and you’re working with another local business owner. You already know them and trust them, the two of you have a relationship. Asking them to sign a contract may seem like you’re taking things too far or even being insulting. You’re tempted just to take a handshake deal and move forward without any official documentation.
If things go smoothly, a handshake deal may work. Perhaps you order products or materials from this other business. You send them the payment, they deliver the materials on time and it doesn’t matter that you don’t have a contract. But there’s one major reason why a handshake deal is a significant risk.
You can’t prove the terms
The issue arises if there is ever a conflict. In the absence of a written contract, it becomes nearly impossible for you to prove the terms.
For example, perhaps you believe you ordered 1,000 units, but the other business owner only delivered 500 units. Not only do you not have the parts and materials you need, but you feel that you’ve paid twice as much as you expected. But the other business owner adamantly claims that the original deal was just for 500 units and that your memory is incorrect.
Or perhaps they miss a crucial deadline. The delivery comes a week late. You want to sue them for compensation because your business lost a significant amount of productivity during the delay. But the other business owner claims that there wasn’t a hard date for the delivery and they didn’t have to show up at any specific time. Without a contract, it will be very hard for you to prove what they actually agreed to.
These are just some of the reasons why written contracts are beneficial. Take the time to look into your legal options while drafting them to protect your investment and your business.