Is a Handshake Agreement Enough to Protect You?

You worked out all the details, and you shook hands on the deal, but there is no written contract. Is that enough to protect you and the agreements you think you have in place? The answer is “it depends”.

Many contracts do not need to be in writing. However, those that fall under the Statute of Frauds and some other laws, definitely need to be in writing or the contract may be unenforceable.

What is the Statute of Frauds?

The Statute of Frauds is a piece of legislation that prevents harm due to fraudulent activity that takes place surrounding an agreement. It does this by requiring all parties to the agreement to sign a written contract. Doing this will often clarify the terms of the agreement, reduce litigation, and provide evidence that a deal was even made. Nobody is videotaping your handshake agreement, so having a written contract agreement will help you solidify your claim that an agreement was made.

What Kinds of Contracts Are Covered Under the Statute of Frauds?

While most states have a Statute of Fraud, the terms of the statute may vary from state to state. Generally, however, the following types of contracts are covered:

1. Promises made in connection with marriage. For example, “if you marry me, I will buy you a beautiful house”.

2. Agreements that according to their terms cannot be completed within a year. This would include a contract to supply a product to someone for five years.

3. Any contract dealing with the purchase or sale of land. Be aware that this does not include leasing of land, because that is not a purchase or sale, as long as the leasing contract can be performed within a year, as stated previously in number 2.

4. A promise to pay someone else’s debt.

Some states have other requirements, so a check must always be made of your particular state’s Statute of Frauds.

Other Legislation Requiring Contracts To Be In Writing

The Uniform Commercial Code (“UCC”) is another piece of legislation that requires contracts to be signed, at least by the party that is being sued under the contract. The UCC governs the sale of goods over $500. Be aware that there are some exceptions that apply to the UCC rules. Your attorney will be aware of them. In addition, there are federal and state acts that apply to door-to-door sales, secondhand car sales by dealers, and certain consumer transactions, to name a few.

What If Your Oral Contract Is In Violation of a Writing Requirement?

The answer to this question depends upon your state and the legislation being violated.

In some cases, the legislation will be a defense to the enforcement of the contract. However, if both parties agree, the contract may still be valid. In other cases, the contract may be absolutely invalid. You will need to consult with your attorney about this.

Conclusion

Even though all contracts aren’t necessarily required to be in writing, it is best to err on the side of caution and protect yourself and your agreement by making sure that the terms of the agreement are written out and signed by all parties.

If you have a question regarding handshake agreements, contracts or the Statute of Frauds, contact the office of Frederic R. Abramson at 212-233-0666

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