Between businesses, a handshake agreement means nothing. If the agreement is not committed to paper it doesn't exist.

However, a handshake agreement could be valid between individuals depending on the context.

First of all, that isn't true. It depends on your jurisdiction but handshake agreements are enforceable in many circumstances[0], although proving details can be difficult. "If it's not written down, it's not a contract" is conservative advice, and generally good advice for how you should treat agreements offered by others. But it is not the legal definition of a contract, which can include verbal or even implicit agreements. That's why so many contracts have the text "the terms of this contract supersedes all prior agreements, written or otherwise."

However in this case all I'm saying is that a handshake agreement among reputable parties is enough to use the word "secured", whether enforceable or otherwise. It is common parlance to say that you've "secured an investment round" once a major investor has verbally agreed, presuming the final contract looks like what they discussed.

[0] For example, if a major investor said they would invest in a Series B at price $X so long as the terms matched at least the same terms as the Series A, other than price, I might then decline investments from others before there is ink on paper. If the investor then pulls out and I'm unable to get a funding round because I've already flip-flopped on other investors, the bankruptcy of my startup might attempt to take the first investor to court for violation of a handshake agreement. If the details could be proven, and especially if there was ill intent (e.g. they never intended to invest, just to torpedo the deal), they could be found in violation of a handshake agreement. The example of fraud is not required, legally speaking, but is typical of the cases you actually see.

So you're saying that if they have a verbal agreement about a written set of terms, they have an agreement?

It sounds like exactly what I'm saying...other (nonverbal) evidence supports the existence of the verbal agreement.

Saying that a verbal agreement is a contract is like describing gravity as an apple falling from a tree. It's technically true but ignores the complexities that go into what can make a verbal contract enforceable.

(And I say this based on actual practice litigating contracts...)

Technically true == true.

If you are a contracts lawyer, then you are doing a serious injustice to the profession by saying contracts do not include verbal agreements.

(And I say this based on actual practice litigating contracts...)

Hard to enforce != non-enforceable.

If the conversation were recorded, would that be enough? Or how about if there were witnesses?

To put a bit more nuance on this: in the US, verbal contracts are hard to enforce because they're usually hard to prove.

But a verbal contract you can prove is enforceable just like a written contract (with some important exceptions covered by a state's statute of frauds). Even in the case of conflicting stories, a jury can believe one side's testimony over the other.

Elon's problem here is that "I left thinking we could get a deal done if we did some other stuff that could get a deal done" is not a statement about an agreement. The Saudis don't have to honor his private prediction.

It‘s funny. In Germany a handshake agreement between individuals is worth nothing but between businesses it‘s enforcable like a written contract.

We're not in Germany. Contract laws vary by country and by state.

In the US, the general law is that verbal contracts are worth the paper they are written on, which is to say, not at all unless other facts/circumstances support the existence of the verbal agreement and its specific terms. Otherwise anyone could claim to have a contract with anyone else.

For example, I claim to have had a verbal agreement with Mark Z for the development of a social networking site owned by me but built by him. In the absence of any other facts, no court would agree that such a contract exists. However, maybe I show copies of emails where we discussed the idea for a social networking site before it launched. That's some evidence that a verbal agreement might have existed, but not as to what the terms were. Most likely, the parties would settle without going to trial, simply because Mark wants to proceed with the IPO without the sword of litigation hanging over his head--even though he would very likely win. The marginal cost of winning at trial is not worth the much larger cost of the harm to the IPO. (This is very loosely based on the Winklevoss saga.)

Your generalization is backwards. In general, US contracts do not need paper memorializing. The majority of transactions are not memorialized.

Specific types of transaction and certain value thresholds require memorializing.

Facts and circumstances are required to support verbal contracts, but in general verbal contracts very much are enforceable.

Yes, of course. I'll ignore the law that I actually learned in law school and in the actual practice of litigating contracts for what some guy said on the internet...

There's a reason I brought up the falling apple example. Verbal contracts are enforceable--if they satisfy the same requirements as written contracts. On top of that, the terms of a verbal agreement must be corroborated by other evidence outside of the verbal agreement itself in order to survive litigation--and the trend in the US legal system is to require more supporting evidence.

Verbal contracts are binding as well in Germany.

It is more nuanced than that, I guess.

Especially if they shook hands in Texas.