In the British business tradition, the “gentleman’s agreement” has long been a symbol of trust and integrity. For decades, many of the UK’s most successful enterprises were built on the strength of a handshake, a shared lunch, or a brief exchange of letters.
At Kaiser Solicitors, we frequently work with business owners who find themselves trapped in expensive, protracted disputes because an agreement that seemed “perfectly clear” at the time of the handshake turned out to be legally porous.
The Myth of the “Non-Binding” Handshake:
The Problem of Certainty:
The risk isn’t just that a contract exists; it’s that the terms of that contract are uncertain. When a dispute arises, it becomes a “he said, she said” battle. Judges must then look at the conduct of the parties to “read in” terms that were never discussed. This lack of certainty is the primary driver of legal costs in commercial litigation.
Intellectual Property (IP): The Ownership Gap:
The Default Rule of Copyright:
In the UK, the general rule is that the first creator of a work owns the copyright. There is one major exception: works created by an employee in the course of their employment automatically belong to the employer.
However, this exception does not apply to independent contractors or “consultants.” If you hire a freelance developer to write code for your new app or a designer to create your logo based on a verbal agreement, they own the IP by default.
The Necessity of a Deed of Assignment:
To transfer ownership of IP from a contractor to your business, the law requires a written document, often executed as a Deed of Assignment. Without this, you only have an “implied license” to use the work. You don’t own it, you can’t easily sell it, and you certainly can’t prevent the contractor from selling a similar version to your competitor.
Regulatory Risks: The Transparency Act 2023:
The “Silent Partner” Risk:
Informal agreements often involve “silent partners”—individuals who provide capital or influence behind the scenes without being named on the official board. Under the new transparency rules, failing to identify a Person of Significant Control (PSC) is a criminal offense.
If your “handshake” deal gives someone 25% or more control over your company’s decisions, and you haven’t declared them to Companies House because the deal was “informal,” you are in breach of the law. The penalties include significant fines and potential director disqualification.
Conclusion:
The “gentleman’s agreement” belongs to an era of lower regulation and less litigiousness. In the fast-moving UK economy of 2025, relying on memory and goodwill is no longer a viable business strategy. At Kaiser Solicitors, we provide the insightful and technical legal expertise needed to transition your business from informal to institutional. Contact us as we offer a “Contractual Health Check” to identify your hidden risks and provide clear, empathetic solutions to secure your interests.
