Handshakes vs. contracts: When it’s time to sign a contract

For centuries, a conversation and a handshake have often sealed a deal. It’s a time-honoured tradition built on trust, relationships and shared values that is still carried on in many farming communities. But as agriculture becomes more complex—with more contracts, more volatility and far higher stakes—farmers and agribusiness owners must ask themselves some tough questions. When is a verbal agreement and a firm handshake enough, and when should you get it in writing?

The enduring power of the handshake

Handshake agreements have long been the backbone of rural business dealings. They have meaning between parties, signifying integrity, respect and mutual understanding. In many farming communities, neighbors have done business this way for decades—buying feed, leasing land, selling crops—based on a simple verbal agreement and a firm shake of the hand.

The reason is clear. Relationships matter. Many farm businesses are multigenerational, and trust carries weight. When you’re dealing with someone you’ve known your whole life, pulling out a contract might feel unnecessary or even offensive.

The legal risks of a handshake

Despite the strong cultural and generational foundation of handshake deals, they do come with legal and financial risks. While the law does recognize verbal agreements in many cases, proving the details can be difficult if things go sideways.

To be legally enforceable, a contract—whether written or verbal—has four elements:

• Offer – One party makes a clear proposal.
• Acceptance – The other party agrees to the proposal.
• Certainty of terms – The terms must be clear and agreed upon.
• Consideration – Something of value must be exchanged.

If the four above conditions are met in an agreement, a contract has been created whether it’s written or not. Even when all these elements exist, handshake agreements are vulnerable to disputes. Memories fade, circumstances change and without written documentation, proving what was agreed upon can be difficult, if not impossible.

When should it be in writing?

While handshakes still hold value, there are situations that demand formal contracts. First, any agreements that involve government (such as subsidies), the sale of land, and/or involve third parties such as finance or investors, all require written contracts.

Outside of these circumstances, these are specific instances when a written agreement is the best course of action for both parties:

1. New business relationships – If you haven’t done business with someone before, a written contract helps set expectations and prevents misunderstandings.
2. Complex transactions – Deals involving multiple stages, long timelines or specific quality standards should always be documented.
3. High financial stakes – If a dispute could result in significant financial loss, a contract provides clarity and protection.
4. Legal requirements – Some agreements, such as land sales or financing arrangements, must be in writing by law.
5. Market volatility – In industries like agriculture, where market conditions fluctuate, a contract can help manage risk.

Family matters: The importance of written agreements in farm succession

When it comes to farm succession and land transfers, relying on verbal agreements and handshake deals can lead to significant legal disputes. Many farm families make informal promises—parents assuring a child that if they stay and work the land, they will one day inherit it. Others assume a first right of refusal will be honoured without documentation. However, without a legally binding agreement, these assurances may be unenforceable.

In the absence of a clear estate plan, other heirs may challenge verbal promises, leading to costly disputes and unintended outcomes. Because jurisdictions can differ in enforcing informal agreements, a written contract remains the safest option for all involved. With a clear plan, everyone in the family will know what to expect when the time comes. Ensuring succession plans are legally enforceable protects both the farm’s heirs and the legacy of the land.

A cautionary tale: The “thumbs-up” contract

In an era of text messages and emojis, informal agreements are also evolving.

A recent court case in Saskatchewan highlighted this shift when a grain buyer texted farmers seeking to purchase flax. Southwest Terminal sent a text message to multiple producers offering to purchase flax at a set price per bushel for delivery that November. A farmer’s son, who handled sales for the operation, had a conversation with Southwest Terminal and agreed verbally. The grain buyer sent a photo of the two-page contract’s front page with the specific terms to the farmer’s son, and he responded with a simple thumbs-up emoji.

However, by the time November arrived, market prices had surged due to a crop failure. The farmer refused to deliver the grain, arguing that no formal contract had been signed. The case went to court, where the judge ruled in favour of the grain buyer, determining that the thumbs-up emoji constituted a legally binding agreement, and that the emoji was tantamount to a signature in the case. The court also considered the lengthy history of transactions between the parties, noting that many previous deals had been finalized in a similar manner via text messages.

This case is a wake-up call for farmers and agribusiness owners. Even casual digital communication can create binding obligations.

If there’s any doubt, follow up in writing to clarify what is—and isn’t—a formal agreement. It’s always better to err on the side of caution for everyone involved and avoid the problems an emoji can bring.

Best practices for protecting your agreements

Not every deal needs a legal contract. However, consider the terms of each deal and determine the risk involved. While a deal may have minimal risk today, think about what the cost would be if something goes wrong in the future.

For those who still prefer handshake deals but want to avoid legal pitfalls, here are some best practices:

• Follow up in writing – A quick text message or email confirming the key terms of the agreement can provide clarity.
• Keep records – Maintain a simple log of agreements and discussions between parties.
• Have witnesses – If possible, involve a third party in verbal agreements who can verify what was said.
• Use simple written agreements – A basic signed document can prevent misunderstandings in the future.
• Know when to involve a lawyer – High-value or long-term agreements should always have appropriate legal oversight.

Moving from a handshake to paper

Shifting from a verbal agreement to a written contract is a practical step in protecting both parties and ensuring clarity in business transactions. This is especially true when the circumstances of the original agreement could change suddenly, without passing on the details of a verbal agreement to someone new.

Instead of framing it as an issue of distrust, present the agreement as a way to set out expectations and prevent any misunderstandings. A clear, well-structured yet simple contract—free of unnecessary legal jargon—can help maintain trust while providing legal certainty for everyone involved.

If the other party is unsure, ease the transition by summarizing key terms in a follow-up email or text message after an initial conversation. This creates a record of the agreement and can serve as a stepping stone to a formal contract. Additionally, keeping contracts straightforward and concise encourages cooperation and reduces resistance.

By being clear and transparent, farmers can safeguard their business interests while preserving the strong working relationships they have come to rely on.

The bottom line

Handshakes and trust will always have a place in farming, but in today’s complex business environment, protecting yourself with clear documentation isn’t a betrayal of trust—it’s smart business. Contracts provide certainty, reduce disputes and safeguard financial interests. A handshake can start a deal, but a written agreement ensures it stands up over time.

As agriculture continues to evolve, farmers must balance tradition with legal protection. Whether sealing a deal with a handshake or signing on the dotted line, the key is ensuring both parties have a clear understanding—and a way to prove it if needed.

If you’d like legal support with grain contracts, succession planning or other agribusiness matters, contact the author or a member of the MLT Aikins Agribusiness and Food practice group.

We also spoke on this topic on the “Mind Your Business” podcast with RealAgriculture.com.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation. 

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