By Simon Abraham

5 August 2015

I have a confession to make, I love Handshake Agreements. Why? Because I am a commercial litigator and they give me a lot of work.

In 2006 our firm successfully enforced an agreement between shareholders in an unlisted company based on nothing more than oral evidence and an IOU signed on the back of a bar coaster. The Court held there was a constructive trust.

It is amazing how often people will enter into a partnership, investment or supply of goods agreement on little more than a handshake. Sometimes clients don’t know how to enforce such agreements or even whether such agreements are enforceable.

Would I allow a client to knowingly make a Handshake Agreement or enter into any other agreement that is oral, undocumented or otherwise based purely on trust – no. However, inevitably, many business people will ignore the above advice and conduct themselves purely on the basis of “Handshake Agreements”.

As the old maxim goes, “an agreement with a gentleman need never be referenced again whereas an agreement with a rogue is not worth the paper it is written upon”.

The problem comes into view when it comes time to sue the rogue or, alternatively, defend an unmeritorious law suit brought by a rogue. The presence or absence of a written agreement is the first thing that a Court is likely to note.

A Handshake Agreement (sometimes also known as an Oral Contract or a Gentlemen’s Agreement) can be successfully enforced – and good supporting evidence will help.

Information created and transmitted electronically such as emails, text messages and even Facebook messages and Twitter posts can also be admitted as evidence by Courts. We can advise you in relation to these matters.

The best policy is always to have a ‘handshake agreement’ recorded in writing at the beginning – otherwise you could find yourself shaking hands with a whole team of litigators.

And what about our bar coaster client?

He has continued to receive dividend payments pursuant to his constructive trust for nearly a decade. In the past week, the Company in which he holds a constructive trust over a parcel of shares was sold for an amount in excess of $ 100 million dollars and he’s a very happy man.

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