The Ninth Circuit Court of Appeal recently observed that “When people shake hands, it means something, but several meanings are possible: . . . ‘a greeting, sign of friendship or goodwill, confirmation of a promise, bargain, etc.; (of combatants) a sign of the absence of ill-feelings.'”
Courts try to enforce the parties’ intentions. Naturally, when a dispute gets to litigation or arbitration, the parties often have differing views of what their intentions were. So courts look at evidence of what was written and what activities took place before, during and after the time of the purported agreement to try to draw inferences about what the parties’ intentions really were. Often, contemporaneous correspondence between the parties provides the most important evidence of whether the parties intended to have a binding agreement immediately, whether the parties intended to further negotiate, or whether the parties intended to be bound only if they sign formal written agreements.
To avoid unnecessary disputes, a cautious businessperson generally tries to make his or her intentions explicit and to document them well. Otherwise, as the Ninth Circuit found, “a jury might reasonably infer either that the handshake was confirmation of a contract, or that it was [just] an expression of friendship and the absence of ill will after a day of hard bargaining.”