Franchise Trade's Oral Contracts: Do They Carry Any Weight? is something I wish I had written and something that should be read in full. The short, pungent answer is "Yes, they can." (The more lawyerly answer is they: depends on the contract.)
"The answer is yes -- as long as you can prove it in court. It's interesting to note that many powerful people have engaged in handshake deals, from Bill Clinton and Newt Gingrich to Bill Gates and Steve Jobs. But more than likely, these handshake deals were followed by large contracts that outlined key deal points and terms. If you are the type of person who prefers informal agreements sealed by a handshake, at the very least, have a few people on hand to witness you 'shake on it.' A handshake deal is always more binding when there are witnesses to the agreement. In other words, avoid agreeing to anything in a dark alley when no one else is looking."
Failing witness testimony or any actions that verify your handshake deal, you can always present supporting materials to strengthen your claim. For example, any correspondence between two parties is admissible in court, particularly if it is sent certified mail. Faxes, emails, letters, memos and receipts all help establish your handshake deal. If you are particularly uncomfortable drawing up a contract -- say with a friend -- a simple "thank you" letter immediately following a handshake is always a good way to establish the terms of your agreement. The recipient will not think of it as possible "evidence," but simply as a polite gesture.