There’s something almost romantic about sealing a business agreement with a handshake. It calls back to a time when word was bond and trust was enough. However, trust doesn’t hold up in court, and memories fade fast—especially when money’s involved.
A handshake deal might save time up front, but it opens the door to disputes, delays, and lost revenue. When the terms aren’t spelled out, people tend to remember things in a way that benefits them.
Are Handshake Deals Enforceable?
Technically, yes. In Minnesota and most other states, an oral contract can be legally binding. But the odds aren’t in your favor. Proving a verbal agreement often becomes a game of he-said-she-said. Unless there’s solid evidence, like emails, texts, or third-party witnesses, it’s your word against theirs.
Even worse, certain agreements must be in writing to be valid under the Statute of Frauds. This includes contracts for real estate, goods over $500, or services that can’t be performed within a year. If your deal falls into one of these categories and isn’t written down, it’s already dead on arrival.
What Courts Actually Look At
Courts aren’t in the business of deciphering vague promises. They want terms: who does what, when, how much, and what happens if it doesn’t go as planned. Without that, even a sincere agreement is likely to fall apart under scrutiny.
Even if both sides admit the deal existed, the court might toss it anyway. No paper trail meant no enforceable terms, and the provider lost both the labor and its payment.
Avoiding Disputes Before They Start
Getting it in writing isn’t just a formality. It forces both sides to spell out exactly what they’re agreeing to. That means fewer misunderstandings, clearer expectations, and stronger legal footing.
At a minimum, any agreement should include:
- The names of all parties involved
- Specific deliverables and deadlines
- Payment terms and consequences for nonpayment
- How changes to the agreement will be handled
- Signatures or some form of written acknowledgment
Even an email thread confirming the basics is better than nothing. But a signed contract, (however simple) will always carry more weight.
Lien Rights and the Cost of Delay
Contractors often get burned by handshake deals when it comes to payment. Minnesota’s lien laws give unpaid contractors powerful rights, but they come with strict deadlines—sometimes as short as 120 days after last providing labor or materials. If you’re relying on verbal promises instead of filing a timely lien, you’re gambling with your income.
In one all-too-common scenario, a subcontractor holds off filing a lien to avoid upsetting a general contractor. Weeks turn into months. Eventually, they realize payment isn’t coming. But by then, the window has closed, and their only option is an unsecured lawsuit. That delay can turn a sure payday into a prolonged legal fight.
Don’t Rely on Trust Alone
In business, unnecessary risk is a bad bet. If the deal matters, write it down. If someone resists putting terms in writing, that’s a red flag.
The best way to prevent future headaches is to make the terms clear from day one. Because once a deal falls apart, the time to clarify expectations is already long gone.
Need Help Drafting or Reviewing a Business Agreement?
Melchert Hubert Sjodin, PLLP works with businesses across Minnesota to protect their interests and enforce their rights. Call (952) 442-7700 to talk with a business attorney who can help you get it in writing—before it’s too late.
