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I think the point you're missing is that an oral contract is legally binding. So even handshake deals are legally binding. The only thing preventing a startup f

• legutierr 14y ago
  I totally agree with you technically, but on a de-facto basis the difficulty of proving a handshake deal is why they are effectively treated not as legal agreements but social commitments, hence Uhhrrr's comment for a clarification of this protocol. If these "handshake" emails are enough to constitute a legally binding commitment, then the power in this relationship slides dramatically in the favor of the investment target. This might not be a problem generally, but like I wrote above, it is not inconceivable that due-diligence would turn up a real problem, especially if the investment target itself is run by shady people. There are any number of reasonable circumstances short of fraud that would make an investor consider that the initial presentation made by a company was misleading enough to require a modification or withdrawal of the original offer. Wouldn't an attempt to modify the offer put the investor in a position to get sued, especially if it was relied upon by the company? This protocol sounds like a great idea, but the vagueness of a verbal commitment has some value (keeping a dispute out of the legal system) that is being sacrificed in exchange for clarity.