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We all know the situation: negotiations have been back and forth, an agreement is reached and the deal is sealed by the good old handshake.

The iron-clad guarantees of the handshake agreement are in place - nothing could go wrong from here.

Unfortunately, this is not the case. While in years gone by someone may have been able to rely on a handshake, in a rapidly evolving and changing business world, there is great peril in relying on such an agreement.

Ensuring agreements or contracts are in writing, with good legal advice on these, is important.

It is not uncommon that people involved in a deal have not carefully considered all of the circumstances that could arise. While the terms of the agreement might seem clear to you, from a legal perspective this is not always the case.

Additionally, it is not unusual for each party to think they have agreed to something slightly different. Having the agreement in writing can remove the potential for confusion.

Courts frequently deal with a scenario where there is no written contract. There can still be a valid contract but this can descend into a 'he said, she said' situation, with both parties trying to recall precise details from years prior. But with a contract in writing, the court will generally make a decision based on the document contents.

Is this handshake agreement worth it? It may save some costs, but the consequences could be significant.

This article was first published in The Stock Journal on Thursday 12 April 2018.