Handshake, Email, or Signed Agreement: When Do You Have a Binding Contract in Alberta?
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A supplier says, "Deal," on the phone. A customer replies "approved" by email. Two business owners shake hands after agreeing on price. The formal contract is supposed to be signed next week.
Is there already a binding agreement?
Possibly.
A contract does not always need a handwritten signature or a single formal document to be enforceable. Alberta law recognizes that contracts can be formed through words, writing, electronic communications, and conduct, depending on the type of transaction and the facts.
The real question is whether the parties reached a sufficiently certain agreement and intended to create legal obligations.
This guide explains how handshake agreements, emails, and signed contracts are treated and how Alberta businesses can reduce uncertainty during negotiations.
What Makes a Contract Legally Binding?
Although every dispute depends on its facts, a business contract generally requires several core elements.
Offer
One party must make a sufficiently clear proposal on defined terms.
Acceptance
The other party must accept the offer. Acceptance generally must correspond with the offer rather than introduce a new material term.
Consideration
There must generally be an exchange of value, such as money, goods, services, property, or reciprocal promises.
Intention to create legal relations
The parties must objectively intend to enter a legal relationship. In commercial transactions, that intention is often easier to establish than in purely social arrangements.
Sufficient certainty
The essential terms must be clear enough for a court to identify what the parties actually agreed to.
A document titled "Contract" is not enough if the essential terms remain unresolved. Conversely, an agreement may be binding even if nobody used a formal contract template.
Can a Handshake Agreement Be Legally Binding?
Yes, a handshake or verbal agreement can be binding in some circumstances.
The fact that there is no signed document does not automatically mean there is no contract.
For example, two businesses might orally agree on:
- the product or service
- quantity
- price
- delivery date
- payment terms
If the parties intend to be bound and begin performing the agreement, there may be strong evidence that a contract exists.
The main problem with verbal contracts is often not legal validity. It is proof.
If a dispute arises six months later, the parties may disagree about what was said, whether a condition applied, or whether a final agreement was ever reached.
That is why important commercial agreements should be put in writing even where an oral agreement might technically be enforceable.
Can an Email Create a Binding Contract?
Yes.
Alberta's Electronic Transactions Act recognizes electronic contracting. Unless the parties agree otherwise, an offer, acceptance, or other matter material to forming a contract can be expressed electronically.
That means an email exchange can potentially create a contract without a traditional ink signature.
Consider this example:
A contractor emails:
"We can complete the renovation for $85,000 plus GST, starting October 15, based on the attached scope. Payment is 20% upfront and the balance in four progress draws."
The customer replies:
"Accepted. Please proceed."
Depending on the context, that exchange may be much more than an informal conversation.
Does Typing Your Name in an Email Count as a Signature?
An electronic signature can take different forms. The legal analysis depends on the document, the transaction, and whether the applicable law permits electronic execution.
An electronic signature may include information a person creates or adopts for the purpose of signing an electronic record.
However, not every document can be handled electronically in exactly the same way. Certain transactions or legal instruments have additional formal requirements.
For important agreements, businesses should use a deliberate signing process rather than assuming any typed name, text message, or click will be sufficient for every legal purpose.
What If the Parties Say a Formal Contract Will Be Signed Later?
This is a common source of disputes.
The fact that the parties expect to sign a more detailed document later does not always mean there is no current agreement.
The key question is whether the parties intended:
- to be bound immediately, with the formal document simply recording the deal; or
- not to be bound until the formal contract was signed
Phrases such as the following can make a major difference:
- "subject to contract"
- "subject to execution of a definitive agreement"
- "non-binding letter of intent"
- "this proposal is not binding until signed by both parties"
If the parties want negotiations to remain non-binding, that intention should be stated clearly.
Can Conduct Create or Confirm a Contract?
Yes.
A party's conduct may support a finding that an offer was accepted or that both sides believed an agreement existed.
Examples include:
- paying a deposit
- delivering goods
- starting work
- issuing invoices in accordance with negotiated terms
- giving access to premises or systems
- making progress payments
Conduct is especially important where the written communications are incomplete.
However, performance should not be used as a substitute for clear documentation where the commercial stakes are significant.
Does the Person Signing Have Authority to Bind the Company?
This question is often overlooked.
Even where the contract terms are clear, a dispute can arise over whether the person who accepted the agreement had authority to bind the corporation.
Businesses should confirm:
- the correct legal name of the company
- the person's title
- signing authority
- whether board or shareholder approval is required
- whether the agreement exceeds internal approval limits
This is particularly important for loans, leases, business purchases, guarantees, and major long-term contracts.
Common Situations Where Businesses Accidentally Create Contracts
Email negotiations
A business owner believes the parties are "still discussing" the deal, but the emails show a clear offer and unconditional acceptance.
Text messages
The parties finalize price and scope by text and immediately start work.
Purchase orders
A vendor accepts and performs a purchase order containing contractual terms the parties did not separately negotiate.
Letters of intent
A document described as an LOI includes some clauses that are explicitly binding and others that are not.
Renewals
The parties continue performing after the written contract expires, creating uncertainty about which terms continue to apply.
How to Avoid Contract Formation Disputes
Businesses can reduce risk by following a few practical rules.
Put essential terms in one place
Document the parties, scope, price, payment, timing, termination rights, and other material terms.
State whether negotiations are binding
If the parties are not to be bound until a definitive agreement is signed, say so clearly.
Control who can accept deals
Make sure employees know their approval limits and who can legally commit the business.
Confirm changes in writing
Do not rely on undocumented side conversations after the contract is signed.
Use version control
Make sure both sides are signing the same final document.
Get legal review for material agreements
A short review before signing can identify missing terms, one-sided clauses, and situations where the business may be assuming more liability than expected.
For related guidance, see our article on Written Contracts for Small Businesses in Alberta.
Frequently Asked Questions
Is a verbal contract enforceable in Alberta?
It can be. A verbal agreement may be enforceable if the required elements of a contract are present and the transaction is not subject to a special legal formality. The practical challenge is often proving the terms.
Can an email saying "I agree" form a contract?
Potentially, yes. If the email objectively accepts a sufficiently certain offer and the parties intend to be legally bound, the electronic exchange may form a contract.
Does every contract need a signature?
No. Some contracts can arise through oral agreement or conduct. However, certain documents and transactions have formal execution requirements, and important business deals should generally be documented and signed.
Does "subject to contract" matter?
Yes. Clear wording showing that the parties do not intend to be bound until a formal agreement is executed can be important evidence about when legal obligations begin.
Final Thoughts
A handshake, email, or text message can carry more legal weight than many business owners realize.
The safest approach is not to assume an agreement is non-binding simply because a formal contract has not yet been signed. Be clear about when negotiations become binding, document the essential terms, and confirm who has authority to commit the business.
Libra Law's Business Law team helps Alberta businesses draft, review, and enforce commercial agreements before uncertainty turns into a dispute.
Talk to a business lawyer at Libra Law before relying on an informal agreement for an important transaction.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. To obtain advice specific to your situation, please consult a lawyer or qualified professional.
