When a Handshake Isn’t Enough - The Risks of Informal Agribusiness Arrangements

\Across rural New Zealand, many farming and agribusiness relationships still begin with a handshake. Trust, history and neighbourly goodwill have long shaped how things get done. As operations grow more complex and the financial stakes rise, informal arrangements that once felt harmless can become a real source of risk.

When a handshake deal starts to unravel, the consequences often reach far beyond the paddock. Disputes can spill into family relationships, business structures and even the courts. This is why more rural clients are choosing to formalise their arrangements early. It is not about a lack of trust. It is about protecting the people and businesses that matter.

We see this often. Many farming families we work with tell us that taking the time to formalise arrangements early has proved invaluable. Far from being the only ones moving away from handshake deals, prudent rural families now treat written agreements as a practical step that protects relationships and keeps operations running smoothly.

Expectations shift over time

People remember conversations differently, especially when years have passed. What one person saw as a short-term favour, another may have understood as a long-term commitment. Without anything written down, it becomes difficult to prove what was actually agreed. This is a common theme in litigation involving rural businesses.

Modern agribusiness is more complex

Today’s farming operations often involve companies, partnerships, trusts and multiple generations. Informal agreements can unintentionally cut across these structures and create issues in areas such as ownership, succession, relationship property, trust obligations and business continuity. These are exactly the kinds of problems that require legal intervention later.

Life changes, and so do people’s rights

A handshake made with a neighbour 20 years ago may not bind their children, trustees or new business partners. When circumstances change, whether through illness, separation, financial pressure or a shift in ownership, informal arrangements are often the first thing to come under scrutiny.

Disputes become more costly without documentation

When things go wrong, the absence of a written agreement can turn a simple misunderstanding into a lengthy dispute. Courts must rely on recollections, conduct and assumptions rather than clear terms. This increases both the cost and the stress for everyone involved.

Common situations where informal arrangements break down

• Grazing or land use agreements where responsibilities or payment terms were never defined.
• Shared machinery or labour where expectations around maintenance or availability drift over time.
• Family arrangements involving sweat equity, succession expectations or contributions to the farm.
• Joint ventures that began with goodwill but now involve different priorities or financial pressures.

These situations often touch not only business law but also personal law, especially when family members, trusts or relationship property issues are involved.

So, what steps can you take to protect your business and your relationships?

1. Put the agreement in writing
   A written agreement does not undermine trust. It protects it. It ensures everyone understands the same thing and provides a clear reference point if circumstances change.
2. Review existing handshake deals
   If you have informal arrangements in place, now is the time to check whether they still reflect reality. A simple review can prevent misunderstandings later and can be especially important where family, trusts or succession planning are involved.
3. Seek advice early
   Early legal advice is almost always cheaper and less stressful than resolving a dispute later. Whether the issue touches on business structures, personal relationships or potential litigation, getting guidance at the start can save significant time and cost.
4. Keep communication open
   Most issues arise not from bad intentions but from assumptions. Regular check ins help ensure expectations remain aligned.

A small step now can prevent a big problem later

Informal arrangements are part of rural New Zealand’s DNA, but they are no substitute for clarity. As agribusiness becomes more sophisticated, the risks of relying on a handshake grow. Taking the time to formalise agreements is one of the simplest ways to protect your business, your family and the relationships that matter.

Whether you need help documenting an arrangement, reviewing an existing one or resolving a dispute that is already emerging, our team is here with practical, down-to-earth advice for all your needs.