We get it. You’ve worked with this person before. You trust each other. You’ve got a verbal agreement – or maybe you sealed the deal with a handshake agreement that felt solid at the time. It’s fast, it feels collaborative, and no one wants to “overcomplicate” things with paperwork.
But here’s the truth: handshake deals often fall apart when the stakes are highest.
We’ve seen it firsthand – business relationships that start with good intentions and end in expensive, avoidable litigation. Handshake agreements can be legally binding in Ontario if they meet certain criteria. But that’s a huge “if.” And more importantly: just because something might be enforceable doesn’t mean it will protect you when it matters most.
Let’s unpack the reality of handshake deals – and why investing in a proper written contract isn’t just smart. It’s essential.
Are Handshake Agreements Legally Binding in Ontario?
Under contract law, a valid contract generally requires four things: offer, acceptance, consideration (something of value exchanged), and an intention to create legal relations. If those exist, a handshake agreement can be legally binding. But here’s the catch: proving it in court is the real challenge.
If you’ve ever wondered what makes a contract legally binding, these five elements are the foundation courts will look for:
- Both people must be able to make legal decisions (they’re adults and mentally capable).
- The agreement must be legal – you can’t make a valid contract to do something illegal.
- You both have to agree on the same thing – you’re on the same page.
- You both intend for this to be a real, enforceable agreement, not just a casual promise.
- Something of value is exchanged, like money, services, or goods.
So, technically, if these five elements exist, a verbal or handshake agreement can be legally binding. But verbal contract enforceability depends heavily on your ability to prove those terms – and most business owners can’t.
But here’s the catch: proving it in court is a different story entirely. Without written terms, how do you prove what was agreed to? What happens if the other party remembers it differently – or claims you never agreed in the first place?
Courts don’t like guessing. And you don’t want your legal rights riding on someone else’s interpretation of a conversation that happened over coffee two months ago. A contract law lawyer can help you avoid these gray areas by putting clear terms on paper.
Why We Don’t Recommend Handshake Agreements (Even When You “Trust” the Person)
Verbal Agreement vs Written Contract: Why the Difference Matters
Many people assume that because something was said and agreed to, it’s enough. But in disputes, the court relies on written proof – not memory. Comparing a verbal agreement vs written contract, the written version is the only option in terms of clarity, enforceability, and protection because it’s actually set out in writing.
It’s not about distrust, and experienced business owners know it’s not insulting to suggest putting things down in an agreement. They usually prefer it.
It’s about clarity, risk management, and future-proofing your business.
Here are just a few real-world scenarios where handshake agreements cause problems:
1. Payment Disputes
You agreed to split costs. But was that 50/50? What if one party provided more value or resources? Did you agree on payment timelines, milestones, or interest on late payments?
Without a written contract, these details get murky – fast.
2. Scope Creep
You started out agreeing to “help with marketing.” But now the other party expects you to redesign their entire website, manage ad spend, and attend weekly meetings – for the same pay. A clear contract avoids this.
3. Equity or Ownership Disputes
Handshake partnerships can spiral into massive legal headaches. Did you really give away 20% of your business just because you said, “We’ll be partners”? Courts may say yes, if you behave like you did. If the agreement wasn’t in writing, you could be stuck with consequences you didn’t intend. A partnership agreement lawyer can help ensure everyone’s roles and expectations are properly documented before issues arise.
4. Termination Clauses
How do you end the agreement if things aren’t working out? What happens to the work done? What about intellectual property? Contracts handle all of this and more. Without it down in writing, you’re exposed to major vulnerability in your business dealings.
What a Lawyer Reviewed Contract Can Do For You
You’ll need a contract drafting lawyer or a small business contract lawyer who understands the risks of handshake agreements, and can protect your work and relationships.
Here’s what a well-drafted contract does:
- Defines the relationship clearly: Who’s doing what, when, how, and for how much.
- Sets expectations: So nobody is guessing or assuming things that were never agreed to.
- Reduces your liability: By including limitation of liability clauses and addressing risk allocation.
- Includes dispute resolution terms: So you can handle issues privately, quickly, and cost-effectively – often options allow you to suggest resolution without court involvement.
- Protects your intellectual property: You worked hard to build your brand. Your contract should protect it.
- Addresses termination: You’ll know how to exit gracefully, and what happens if either party drops the ball.
“But It’s Too Expensive to Get a Contract Drafted…”
Is it?
Let’s look at the numbers.
The cost of a properly tailored contract typically starts at a few hundred dollars, depending on complexity and how many nuances there are. Compare that to the average cost of a legal dispute in Ontario, which can easily run into the tens of thousands – not to mention lost time, stress, and business opportunities.
That’s not just legal protection. It’s a smart investment.
And unlike templates or AI-generated documents, contracts produced by a lawyer aren’t generic. They’re custom-built for your situation, your goals, specific to your industry. Whether you’re an artist, consultant, start-up founder, or small business owner, a lawyer can draft agreements that match the real risks of your work – not just boilerplate terms.
Contracts Are a Business Tool – Not Just Legal Paperwork
Too often, people treat contracts like fine print. Something you put off until it’s too late.
A great contract is a communication tool. It fosters clarity, confidence, and accountability. It helps build stronger partnerships, not weaker ones.
In fact, many disputes we’ve seen could’ve been avoided entirely if there had just been a clear contract at the outset. When people know what to expect, they’re less likely to feel misled or betrayed. That’s why contracts aren’t just about legality, they’re about relationship management.
Our Process is Built for Busy People
We understand that many of our clients don’t want to wade through legal jargon. That’s why we make the contract process as simple, fast, and efficient as possible.
Our approach:
- We start with a quick, complimentary call to touch base and understand your goals.
- We flag any risks based on your business type and what you’re looking to do.
- We draft a clear, customized contract, often within a few business days.
- We walk you through it – no jargon, no fluff – so you feel confident using it.
A Word on Legal Ethics
As a law firm regulated by the Law Society of Ontario, we’re held to the highest standards of professional conduct, confidentiality, and transparency. That means you’ll always get honest and transparent advice – not pressure to jump into services you don’t need.
We take that responsibility seriously. That’s also why we won’t recommend a DIY contract if we see it and know it won’t hold up in court or protect you properly. Risky shortcuts often cost far more in the long run.
Final Thoughts
If you’ve ever said:
- “We shook on it.”
- “I didn’t want to ruin the vibe with a contract.”
- “We’re friends – it’ll be fine.”
Ask yourself: Can you afford to be wrong?
A handshake might feel easier in the moment – but it could leave you wide open to misunderstanding, liability, and even legal action.
Protect your work. Protect your reputation. Protect your peace of mind.
Whether you need a startup contract lawyer, a freelancer contract lawyer, or guidance on how to prove a verbal agreement in court, Zannes Law Firm will draft your next contract the right way – so you’re protected from the start.
We’re here to make it simple, strategic, and aligned with your business goals – because we know what’s at stake.
Ready to get started?
Book a consultation with us today and let’s make sure your next agreement is one that protects you – not just one that sounds good in the moment.
Real-World Scenarios: What Can Go Wrong Without a Written Contract
Below are two anonymized case studies based on real issues we’ve seen in practice. They highlight how handshake agreements can lead to costly disputes – and how a well-drafted contract could have made all the difference.
Case Study #1: The Verbal Partnership Gone Wrong
Industry: Digital Marketing
Issue: Verbal agreement to split profits
Outcome: $60,000+ in legal fees and lost revenue
Summary:
Two entrepreneurs verbally agreed to partner on a digital marketing agency. One brought in the clients, the other managed service delivery. They agreed to “split everything 50/50,” but never signed a contract. A year later, one partner claimed she owned 50% of the company and demanded profit distributions retroactively. The other said she was just a contractor.
What Went Wrong:
- No written agreement defining ownership or duties
- No documented revenue-sharing model
- No exit clause or dispute resolution method
How a Zannes Law Firm Contract Could Have Helped:
- Clear roles and equity structure
- Terms for profit distribution
- Exit strategy and dissolution process
Case Study #2: The Handshake Deal That Became a Lawsuit
Industry: Construction / General Contracting
Issue: Disagreement over scope and payment
Outcome: Litigation over unpaid work, reputational damage
Summary:
A general contractor took on a residential renovation project based on a handshake. The homeowner verbally agreed to “pay as we go.” Halfway through, the homeowner stopped paying, claiming the work wasn’t what she expected. The contractor sued, but couldn’t prove the agreed scope or payment terms.
What Went Wrong:
- No written contract outlining scope, payment schedule, or dispute resolution
- No written proof of change orders
- Work continued based on “trust,” leading to major losses
How a Zannes Law Firm Contract Could Have Helped:
- Detailed scope of work
- Payment milestones and terms
- Protection clauses for non-payment and work stoppage
