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Without a Sign

Don't get roped into a deal before you know it.

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This story appears in the September 2005 issue of Entrepreneur. Subscribe »

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.

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