As our ever-evolving world of technological advancements collides with the legal market, we are constantly finding ourselves trying to balance innovative technology with its legal ramifications. A prime example of this balance is SaverOne, a company that has found a way to prevent distracted driving in a smart and efficient way without removing navigation or “smart” apps. SaverOne provides distractable drivers with instructions on how to remain focused while driving, and reminds them not to look at their phones, which is largely the root cause of many vehicular accidents.
The balance between technology and legality can be a tricky one, and unfortunately one that some tech companies find out after the fact. One technology related legal issue is the enforceability of verbal agreements. Verbal agreements, also known as oral agreements and handshakes, are generally considered more informal than written agreements, but many things in the tech market don’t always have to be formal to be able to work. Companies can make verbal agreements like price of service, delivery terms, equipment rental schedules, payment terms, and joint ventures without tacit approval and without a paper trail.
Even though verbal agreements are not currently considered the most formal of agreements, many providers and other companies find themselves performing contractual obligations of an agreed upon agreement without a signed contract. In these cases, however, are handshakes legally binding? The short answer is yes, but that a verbal “yes” or a handshake is only legally binding if there is some sort of record, associated parties, terms, and consideration (or “thing of value” exchanged). Below are the best practices to ensure that a “yes” or a handshake is practically binding.
In the tech world, verbal agreements run a lot of the same risks as any other industry. One of the greatest risks of verbal agreements is that terms are subject to interpretation (the risk of something being locked on “read” is much lower) and that there is no way of proving that the terms of an agreement existed to begin with. When problems arise from verbal agreements, the costs can be high for a business, such as risk to normal operation and business relations.
Averring to a verbal agreement, and then disavowing it, can lead to a lawsuit. For example, when Tech Company A reaches out to Tech Company B inquiring about a verbal mutual agreement such as price and delivery. Later, when Tech Company A disputes the price of delivery (and delivery), Tech Company B can sue Tech Company A for breach of contract. When this happens statements from Tech Company A and B are analyzed by the court. In such circumstances, the court will analyze whether there was a meeting of the minds and in the absence of a written agreement, testimony of witnesses is the primary form of evidence.
Enforceability of a verbal agreement can have real-world business impacts. Tech companies can lose business relations based on something as small as not following through on an agreement. From a legal standpoint, litigating a handshake can be hard for a tech company because enforcement of a verbal agreement requires the presentation of evidence to support the parties’ candidacy.
For a tech company or investor considering a handshake, you should take preventative measures to ensure there is no misunderstanding. And as always, when a handshake really does get used, verify that the other party has reached a mutual agreement and understand how to prepare for litigation if the handshake does not get fulfilled.
For a handshake to be enforceable, the person enforcing the agreement must prove the specifics of the agreement. When testimony becomes necessary, having a witness is the best way to present a verbal agreement. A witness can validate the parameters of the agreement, and serve as a counteract to another party’s cancellations.
SaverOne takes the need for clarity and specificity seriously when it comes to verbal agreements. The technology company often creates formal contracts when it enters into agreements with contractors, vendors, and others who work with the company. Keeping accurate records of who employees should be working with, and offering a formal contract with terms, can provide clear proof should something go wrong with the verbal agreement. However, SaverOne doesn’t stop there. The company continuously talks to each other and updates their contracts as needed to ensure that everyone is on the same page – even when celebrating one of their successes.
In the words of a member of SaverOne, when asked what advice he would provide to other tech investors who would like to avoid legal issues in the future, “I encourage each business to get everything writing, verbally put things in writing, and then reiterate the agreement with the parties involved.” In this hesitation is a verbal agreement, move cautiously, and never ever gamble on legal uncertainty.
For more information on verbal agreements and their enforceability, you can visit the Wikipedia page on contracts.
