There is no reward without risk. I've had incredible success in business back in the day, from going out on the ledge and taking chances with people I barely knew. However, I've also had that success striped away from me by trusting the wrong people. I'd of been rich several years ago if not for a couple of bad choices. Normally my bad choices revolve around people.
From doing some introspection and reading this thread, I think the key is to mitigate that risk as much as possible. A person will never have complete information until the game is done. Its not like chess; more like poker. One way for me to do this will be through upfront expectations with the person as well as a contract like you described. I do need a lot more self examination, especially with how easily I can trust other people.