Without a Sign

Think a deal ain't a deal until everyone signs on the dotted line? This is not only wrong; it's a dangerous misconception. A handshake or an oral agreement are obvious exceptions. But did you know that an exchange of letters or a simple promise can legally bind you?

The problem in a nutshell: In that inevitable windstorm of communication that accompanies most deals, you never know when a judge or jury will say you've crossed the line from courtship to commitment. There is no neat litmus test. Even if you never signed, courts will look at everything: whether anyone is acting like they have a deal, whether one would expect the parties to wait until more comprehensive papers (as opposed to short deal letters) are signed, whether they've issued press releases or thrown parties, and so on.

So if you don't want to get roped into a deal prematurely, say so--loudly, clearly and in writing. Don't perform your side of the bargain, and don't let anyone act as if the deal's made. But proceed carefully when executing this advice, or you may chill your negotiations.

A speaker and attorney in Los Angeles, Marc Diener is author of Deal Power.

This article was originally published in the September 2005 print edition of Entrepreneur with the headline: Without a Sign.