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But I Didn't Sign It!

Be careful-that doesn't always mean it's not a deal.

This story appears in the December 2000 issue of Entrepreneur. Subscribe »

There's a common misconception that a deal ain't a deal until everyone signs on the dotted line. This thinking is not only wrong, but also dangerous. A handshake or oral agreement is the obvious exception. But did you know that an exchange of letters or even a simple promise can legally bind you? The Pennzoil Co. v. Texaco Inc. case is the most celebrated example-and one that every dealmaker should study.

On December 28, 1983, Pennzoil offered to buy Getty Oil. Five days later, a "memorandum of agreement" was signed by Pennzoil and Getty, but Getty's board hadn't voted on it yet. Regardless, on January 4, Getty issued a press release announcing the merger, subject to the signing of a formal agreement. However, sometime between the 3rd and the 5th, Getty apparently also started talking to Texaco, because on January 6, Texaco announced that it had just bought Getty!

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