This publication appeared in the December 2022 edition of “Club Life”.
Many clubs outsource their catering, cleaning and security services to third party providers. This article deals with handshake agreements and why it is necessary for clubs to have written agreements in place.
Handshake agreements usually involve a verbal agreement sealed by a handshake at the commencement of a business relationship when both parties are confident the relationship will be a positive and successful one.
Handshake agreements are usually legally binding and enforceable agreements
Although handshake agreements may initially appear to be more convenient from a time and cost perspective, they are fraught with danger and should be avoided. Their flaws usually do not emerge until a dispute arises. The main problem with verbal agreements is the difficulty in working out what exactly the terms are of the agreement between the parties.
As the terms of the agreement are not formally documented in writing, it is not uncommon for parties to have (or claim to have) different understandings on the terms of the agreement. If a verbal agreement does not require the contractor to provide indemnities and releases in favour of the club, there is no legal obligation on the contractor to do so after the verbal agreement has been entered into.
Non-agreement on the terms of the handshake agreement
If the parties cannot reach an agreement on the terms of the handshake agreement but continue to do business, there will be a dispute between the parties.
Given the terms of the agreement are not documented in writing, it will often be a case of one party’s word against the other. As you can appreciate, such disputes are difficult for the parties to resolve between themselves.
In the absence of a mutual agreement between the parties to settle the dispute, it is possible for a party to the dispute to commence proceedings against the other party in order for a “third party” (such as a court or tribunal) to make a binding decision on what constitutes the terms of the contract.
A court or tribunal will need to make an assessment based upon the evidence of the parties as to what was actually agreed upon.
Recommendation
Clubs should avoid these problems by not entering into handshake agreements and only agreeing on the basis of written contracts with contractors and suppliers. This will ensure the rights and obligations of the parties are clearly set out and if a dispute arises, the written contract can be relied upon. Although entering into written contracts will involve costs and time, they will provide the contracting parties with greater certainty as to the terms of the agreement and greater clarity if the relationship sours.
Should you wish to discuss any aspect of this Newsletter or want any legal advice about these matters, please contact any member of the Clubs team on 8251 7777 or by email:
| Bruce Gotterson: | b.gotterson@pigott.com.au |
| Ray Travers: | r.travers@pigott.com.au |
| Tony Johnston: | t.johnston@pigott.com.au |
| John Ralston: | j.ralston@pigott.com.au |
| Michael McCluskey: | m.mccluskey@pigott.com.au |
| Julian Hawkins: | j.hawkins@pigott.com.au |
This publication is produced by Pigott Stinson. It is intended to provide general information only. The contents of this publication do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this publication. Liability limited by a scheme approved under Professional Standards Legislation.