Actually, when all are gentlemen there are no problems.
I love doing business on a handshake, but these days a handshake often doesn't mean what it used to.
I've recently started wondering how legally binding a handshake can be considered. I know there is a problem with possible ambiguity, but at the same time I consider "shaking on it" while looking someone in the eye much more profound than signing a contract. That's just a formality.
I don't know (much as regards this) about other countries, and I'm not an expert (on law), but in the UK, I think it would be called a "Verbal Contract", and would be reasonably binding in UK law.
There have been (many I think), court cases, where people have been held to these "Verbal Contacts".
Where it gets complicated, is where someone sells you a car and verbally says (it is PERFECT, NO FAULTS, etc). You then give them a cheque for the deposit (hence it is somewhat provable), and give them £cash for the rest of the money.
On arriving home with your car, you find out it has got lots of major (expensive) faults, and is practically worthless. You can take them to court (generally, businesses are often held to account if selling dodgy vehicles, but if sold privately, it is often "sold as seen", even if that is NOT explicitly stated) if necessary, because of all their (verbal contract) claims about how good/reliable the car was going to be.
Cars are a bad example here, because cars (when sold privately), are generally accepted to be sold "as seen". I.e. buyer beware. So I should have thought up a better example.