Business Partners on a Handshake Part 2: What if You Didn't Write it Down?
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. December 6, 2012
By Philippe Lieberman
Two weeks ago, I blogged about the importance of a written agreement to mitigate future litigation when a business partnership goes south. (Previous post can be found here)
But what happens if you entered into the agreement on a handshake deal, without a written agreement? What if the partnership breaks up? What if the other side claims there was no contract? How do you prove the existence of an agreement?
While most people associate a contract with a formal, written document signed by both parties, a contract can be proven in a variety of ways. All is not always lost simply because the parties did not enter into the typical, formal written contract. Parties’ course of conduct, e-mails, text messages, pay stubs, cancelled checks, wire transfers, deposit slips, bank statement, tax returns, public filings and oral testimony are some examples of ways to prove the existence of a contract.
Handshake deals to form a partnership or corporation, for example, can be proven through a variety of ways. Bank statements, checks or money transfers can reflect the parties’ investment to launch the entity. Corporate filings can identify partners, officers, or directors of the entity. Tax returns can reflect past distributions; through financial statements, loan applications and other financial documents.
Handshake deals to pay a party a certain percentage commission can be proven through past commission payments, ledgers and other financial documents. The parties’ past course of dealings can be a strong indication of the parties’ intent.
These are only some examples of ways that agreements can be proven without the existence of formal written contracts. If you are in a business dispute without a written contract, you may still be able to prove there was an agreement through documents and communications.