13 ms·

Fucking Sue Me

695 points by pud 15y ago

EponymousCoward 15y ago
Not just a way to run a business, but a way to live life. Might not work for everyone, just as the opposite of whatever this strategy is may not work for everyone.
TomGullen 15y ago
I think the lesson is here it's all fine and dandy until someone does sue you. Then it's a different story.
- _delirium 15y ago
  If you're a 22-year-old with no assets it's probably not much different; you lose a judgment and declare bankruptcy and that's that. If you're older and have a lot of assets, you just do it via a corporation and it's the same, thanks to the magical unaccountability of the corporate veil.
  - tptacek 15y ago
    IANAL, but signing contracts in bad faith may under some circumstances be tortious. Your corporate liability shield probably does not protect you from tort claims. You are shielded far more by your lack of meaningful assets. You aren't worth anything to sue. But there are clients, I promise you, who will turn out to be vindictive. Incidentally, if you're 22 years old, you should still have an LLC.
  - veyron 15y ago
    Nowadays a lot of companies try to add clauses that pierce the corporate veil (for example, having personal guarantees)
    - learc83 15y ago
      For all kinds of things, like leases and such were the company is too young to have any credit. But a personal guarantee on delivering a website on time would be a bit much.
      - veyron 15y ago
        For longer projects, you should be asking for some sort of upfront payment (to avoid being screwed over -- i learned that the hard way). In that circumstance, companies may demand some sort of clawback if benchmarks aren't met.
  - citricsquid 15y ago
    bankruptcy (at least here in England) means you're royally fucked, especially at 22.
    - _delirium 15y ago
      In the U.S. it depends somewhat; if you have a place to rent (e.g. know your landlord or it's via a friend) it's not a huge deal. You won't get a mortgage, and it'll make getting new credit cards or rentals from strangers harder, but not life-ending. Especially if you have a glamorous story behind it, like going bankrupt due to your tech startup being sued into oblivion...
toast76 15y ago
Just change that one line "He was right. I got the job, they paid, things went well, nobody got sued." to "He was wrong. I got the job, they didn't pay, things went horribly wrong, everybody go sued".
- gnu6 15y ago
  Even if it were changed to that, the story wouldn't end with "I couldn't buy food, my macbook pro got repossessed, and I went to federal pound-you-in-the-ass prison." If you do get sued and your business collapses you can always start another one.
  - analyst74 15y ago
    Personal liability would be a nasty thing to deal with after your business failed. And you may not get to start another company with a huge personal debt.
    - nknight 15y ago
      I wouldn't sign a contract for personal liability on something that big, but bankruptcy law exists for a reason.
      - vacri 15y ago
        Didn't the US essentially nullify bankruptcy laws towards Bush's second term? As in, you can declare bankruptcy, but it doesn't clear your debts?
        nknight 15y ago
        Uh, no. You're thinking of BAPCPA, which sucked, but was a far cry from what you're suggesting. Chapter 7 (straight liquidation) is harder but still very possible, especially if you've just been slapped with a multimillion-dollar verdict, while Chapter 13 (individual reorg) came out mostly intact, and 13 does result in discharges (but there are limits to the amount of debt you can have and qualify for 13). BAPCPA: http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and... Chapter 7: http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_States_Code http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_Sta... Chapter 13: http://en.wikipedia.org/wiki/Chapter_13,_Title_11,_United_States_Code http://en.wikipedia.org/wiki/Chapter_13,_Title_11,_United_St...
petegrif 15y ago
Great post. :)
SomeCallMeTim 15y ago
I still show my contracts to my lawyer, and sometimes really fight for certain clauses, but I'm realistic: Sometimes having a signed contract is more important to me than certain categories of unlikely risk mitigation. If you have the luxury of leverage -- the ability and willingness to walk away if the contract isn't perfect -- then yes. Hammer it out to protect your interests. But if the contract is critical to the company's survival, then he's right: Just sign it. It's better to have an income from an imperfect contract, then no company at all because you've run out of money.
- egiva 15y ago
  Me too, although I think that contracts are only worth how much money you're willing to spend to defend them with lawyers, court costs, etc. Good customer service gets you out of most predicaments, so I review the contract but spend more time worrying about how to serve my customers.
- epo 15y ago
  My experience is that the people who jerk you around with contracts are usually bad payers. If it's a bad contract then the prospect of income is very uncertain. Business ultimately relies in trust, if they give you a poor contract then it is a strong reason not to trust them over anything.
  - SomeCallMeTim 15y ago
    I went back and forth with one client for about five months on a contract worth about $300k. They actually started PAYING me on milestones well before the contract was signed. We didn't nail down a final version until just before the last milestone payment. They paid in full, no delays -- they even paid extra for when they wanted additional changes out of scope. In my industry (games), it's actually quite common to start work on a contract before it's signed. They were a rather large company, granted. But yes, don't DO a lot of work for someone you neither trust nor have a solid contract with. If the contract allows them to weasel out of giving you any money at all after you've put significant time and resources into it, then that would be qualify as "I sometimes really fight for certain clauses". Ownership of IP is another critical nonnegotiable for me: If I have a library that I own and I'm using it in someone's product, it's going to be spelled out in the contract that I still own it (work for hire notwithstanding), or I'm not signing. But if you're talking about unbalanced boilerplate legalese (nonreciprocal indemnification or nondisclosure, or clauses that otherwise aren't ideal according to your legal counsel), then I still agree with the article.
tptacek 15y ago
Ugh. At one extreme: giving your counsel veto power over what contracts you sign, and allowing them to bill time ping-ponging contracts until prospects give up. At the other extreme: just signing everything and saying "fucking sue me" when things go sideways. You should be somewhere in the middle. Contracts more often than not have provisions that are silly for you to accept verbatim. And, contracts more often than not have provisions you'd rather not accept, but that are baked into your prospect's own processes and not changeable. No matter what you do, if you're being sensible, there are going to be tough decisions to make every once in awhile. If there aren't, you're probably doing something wrong. Like, for instance, signing tens of different contracts from giant companies without any legal review.
- Duff 15y ago
  You need to be able to figure out what's negotiable and what isn't. I work for one of those massive organizations that everyone hates doing business with, but sort of has to. I've watched dozens of vendors spin their wheels for months over boilerplate stuff that nobody is empowered to change. They ultimately lose the deal over something that ultimately didn't matter.
  - tptacek 15y ago
    It's absolutely true. You have to figure out what terms are changeable and which ones aren't, and you have to know that sometimes you'll be accepting things you really don't want to, which means accepting risks, sometimes serious risks. But having said all that: in almost every contract, there's something crappy that can be changed.
    - politician 15y ago
      Unless you're renting an apartment in Austin.
- nirvana 15y ago
  I think the point to "fucking sue me" is that you don't "fucking sue" someone over something trivial. So, if the dollar value of some provision in the contract is not worth the cost of a lawsuit, in a way, it is kinda immaterial to the agreement because it would cost more to collect. So, I think the article is trying to hit the middle road you're advocating, though didn't make it as explicitly clear as it could have.
compay 15y ago
"Just be lucky like I was" is rather poor advice.
- compay 15y ago
  To clarify though, I believe the success he's had is most certainly NOT luck but rather hard work and merit. My comment was referring just to that specific article.
- nknight 15y ago
  Did you read the very last line of his post? "I’m not sure what the lesson is here." I don't see him giving advice to anybody. I see him recounting some rather... debatable decisions early in his career.
  - compay 15y ago
    Yeah, but if you're recounting what has worked well for you in your career, you're giving advice - even if you qualify it at the last minute with a totally wishy washy ending like that. Also, if you've followed Kaplan since his (awesome) "Fucked Company" website you'll know that the man is no babe in the woods. IMO he has too good a grasp on the nature and consequences of risk to be "not sure" what the lesson is here.
taariqlewis 15y ago
When there's nothing to lose, there's everything to gain, but when there's everything to lose, there's alot more lawyering that will keep yer nose clean if something eventually goes south. Get a lawyer when there's really something to lose.
joshfraser 15y ago
You have to balance your risk and reward and take the biggest risks when you have little to lose. The riskiest thing you can do is play it safe.
- nicksergeant 15y ago
  I know it feels good to think this, but often times playing it safe is not the riskiest thing to do. Climbing the corporate ladder, being smart with investments, and doing the right things financially are considered "playing it safe" and would be viewed considerably less risky than alternatives.
owenmarshall 15y ago
> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast. > “Worry about that in 2 months,” Dad said. Speaking from the perspective of that employee, fuck you. OK, for the serious point: you may be not give a shit about risk. Good for you, you crazy risk taker! The world truly needs more people like you. But for me? I've got a mortgage and a car payment and a wife who is trying to go through graduate school. I need to know that my ass isn't going to come into work on the 61st day and hear you say "Well, looks like we're outta cash -- sorry buddy..." If, on the other hand, you share that risk with me up front, thanks -- you're a good boss.
- brk 15y ago
  Then don't be employee #1. Ever. I get your point, but if those things are true, then that would not be the proper job for you to take, no matter how risk prone or risk averse the founder is.
  - rick888 15y ago
    Being employee #1 is the worst of both worlds. You get the risk of a startup and you most likely will get very little payout if the startup is successful. Most of the people I know that were employee #1 got nothing.
    - lojack 15y ago
      That's reassuring. (putting in my two weeks notice tomorrow to be employee #1)
      - semanticist 15y ago
        Make sure that you'd be happy if you worked long and hard for the start-up and all you got was the salary they're paying you + the experience. Even if the start-up is a huge success, the chances of you making substantial amounts of money are low, unless you have founder-level equity.
nandemo 15y ago
> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast. > “Worry about that in 2 months,” Dad said. This seems really dishonest. Yeah, everybody knows that startups are risky, but if you can't afford to pay more than 2 months of salary, then don't hire a full-timer. Either find a co-founder or hire a contractor instead.
- pud 15y ago
  Not many companies could afford to pay their entire payroll for a quarter, if sales were $0.00 for that quarter.
  - xorglorb 15y ago
    Most companies also have steady revenue streams.
    - mkopinsky 15y ago
      Or at least revenue forecasts.
  - nandemo 15y ago
    Like other comments said, any company should have a revenue forecast. Companies that don't have a steady revenue stream will have enough cash from either capital reserves or financing. If you don't then don't hire a employee. Companies that already have employees and forecast they cannot make payroll (say) 6 months from now will typically either borrow money or start lay-offs, not hire more people and worry about later. Failing to pay wages is a serious problem.
revorad 15y ago
I once rode a motorbike drunk, with a stranger sitting behind me. We didn't die. Lesson learnt: I got lucky. I don't drive drunk any more :-)
m0shen 15y ago
Sounds like the opposite advice to: http://www.vimeo.com/22053820 http://www.vimeo.com/22053820 (Fuck you, pay me). Should have found a better lawyer.
nirvana 15y ago
I wish someone would write an expert system that works like his dad. Something that had some validation of what was a worthwhile risk and what was a risk that even if you tried to mitigate the risk really would still be a risk. (For instance, even if you had enough work to presume you could employ that employee for more than 2 months, that's not a guarantee. What if the contract with a customer was for 12 months, but 2 months in, right after staffing up, they just cancelled it and said "fucking sue me"? Kinda hard for the small startup to sue... and if they did, and they won, that win would be years after they had to let the employees go.) You can't mitigate all risk, and being able to ignore the ones that you can't' do anything about is an important skill. This goes for technical risk as well. I try not to over-architect. I spend a lot of time trying to decide which things need to be handled now, and which things can just be added later.
shawnee_ 15y ago
The lesson here: it was 1998. "The industry" was still a little fledgling, so the legal territory was still largely unchartered. But it grew into an ugly duckling, quickly. Sent the contract to my lawyer. She marked it up, sent it to the client. Then the client marked it up and sent it back to my lawyer. And so on, back and forth for almost a month. Garbage in, garbage out. During the "ugly duckling" phase, the legal machine is just learning that it can spew garbage. It tests its limits. Just how much garbage can it spit before something happens? When the garbage is between private parties? Apparently, a lot. I charged my first client $1,400. My second client paid $5,400. The next paid $24,000. I remember the exact amounts — they were the largest checks I’d seen up til that point. Then I wrote a proposal for $340,000... The Bust was just growing pains. It probably could be reasonably argued that the industry is still in an ugly duckling phase (multi-Billion dollar valuations, really?) But this is part of growing up. In Code and Other Laws of Cyberspace Lessig writes: It is a lack of a certain kind of regulation that produced the Y2K problem, not too much regulation. An overemphasis on the private got us here, not an overly statist federal government. Were the tort system better at holding producers responsible for the harms they create, code writers and their employers would have been more concerned with the harm their code would create. Were contract law not so eager to allow liability in economic transactions to be waived, the licenses that absolved the code writers of any potential liability from bad code would not have induced an even greater laxity in what these code writers were producing. And were the intellectual property system more concerned with capturing and preserving knowledge than with allowing private actors to capture and preserve profit, we might have had a copyright system that required the lodging of source code with the government before the protection of copyright was granted, thus creating an incentive to preserve source code and hence create a resource that does not now exist but that we might have turned to in undoing the consequences of this bad code. If in all these ways government had been different, the problems of Y2K would have been different as well. [source: http://www.code-is-law.org/conclusion_excerpt.html http://www.code-is-law.org/conclusion_excerpt.html] This is dated (1999), but interesting. He was wrong about Y2K, of course, but not about the underlying issues and problems with contract law and IP.
- fleitz 15y ago
  Why would a coder ever be held responsible for something not specified in the requirements doc? If people wanted Y2K compliant software in the 70s and 80s they should have specified it. As for multibillion dollar valuations, what's wrong with the valuations on MSFT, AAPL, GOOG? If you think the PE is crazy on LNKD, just short it. As for what VCs are willing to invest for particular companies those investments are more anecdotes than data.
EGreg 15y ago
If you are the small guy, then try to get YOUR document to be the starting point. Use YOUR law firm to write it. Go to a law firm and tell them to use something from a similar contract before. If you expect there will be negotiations, basically try to use and re-use your standard document. You are going to be in this business for a while, hopefully. So you only have to pay for your standard document once. Plus you'll know the ins and outs of it better than anyone else. I think the right solution these days is to insist on standard documents and focus on the amendments rather than getting something from scratch. There is a good list of documents to form startups, for example, here: http://www.avc.com/a_vc/2010/03/standardized-venture-funding-docs.html http://www.avc.com/a_vc/2010/03/standardized-venture-funding... Similarly there are things at legalzoom and other places. I realize that sometimes the big company will insist on going with their standard contract, but if they were really that adamant, they wouldn't let you go back and forth with your lawyer too much. Just start with your own document or walk away if you don't want to take the risk.
ditojim 15y ago
sounds like your dad had faith in you, above all. don't misinterpret this as careless disregard for risk.
AJ007 15y ago
Linkbait. Some of my competitors write contracts specifically so that they can sue other companies. How about this, I fucking read my contracts and I don't sign bullshit.
- barefoot 15y ago
  Thanks for sharing this. Do you have any tips for things to look out for?
  - GeorgeTirebiter 15y ago
    The main thing I look for is unknowable downside. For example, when a big company asks my small company to indemnify them, I always limit the indemnification to whatever they paid for the work. If they don't like that, then I get a different client. ALSO, NEVER let lawyers run the show. Lawyers are your water boys/girls -- they do what YOU want them to do. If they don't, then get a different lawyer. YOU have to read and understand everything in a contract -- and lawyers can help you do that. But in general, you tell your lawyer what you want, and she does it. End of story.
- rhizome 15y ago
  Keep in mind that Pud is the original Mike Arrington.
wglb 15y ago
Well, your business may well not be like his business. First, it was all new then, and the first half of the swhoosh to the top. But being of the conservative sort, I have generally had a lawyer review whatever contracts people want me to sign, firstly for him to explain what it really means--what are the actual risks. Even as a very young fellow in my first one with a contract, I knew enough that it was for me to make the business decision and for my lawyer to explain what the legal ins and outs were. Then there was the fellow who liked to do negotiation by contract. It said that everything that I did they owned, probably back a year before I started, and that if I didn't perform the would take my house and my first born, but then on the second page they said that we are kidding about the house. And it was from a law firm that was bigger than most buildings, and Very Famous. But I pushed back and after a couple of cycles got things to be in a reasonable state. In another long-term consulting contract negotiation, my lawyer's first response after reading it was one word "Egregious". Fortunately, I was able to hammer that into better shape. This was one where the contract was supposedly non-negotiable. I learned something there. But in no world that I am familiar with does it make sense for the lawyer to do the negotiation. They (in all likelihood) don't understand your business as well as you do. Even though I have been doing this for a while now, I wouldn't sign anything without a lawyer's review. But I have also been at the other extreme, where there was no contract for a multi-year deal and it worked out well. Use a lawyer, but use the lawyer wisely.
mmaunder 15y ago
Two things: 1. They will sue. Medium to large - in fact any mature business, considers lawyers and the threat of lawsuits and litigation as a cost of doing business. They don't get emotionally involved, they just do it. FYI, looking at lawyers & legal as cost of doing biz is a healthy attitude and may save you a heart attack. 2. Telling someone to just "fucking sue me" or simply "sue me" makes it combative and I made this beginner mistake early on in being a CEO. I actually simply asked their lawyer if he thought his case "actually has any merit?" in a cocky tone in a phone call. Turns out he thought it did. Once I had capable council on my side she had to work hard to make nice with the other side and bring it to settlement hours before we were irrevocably committed to litigating the issue. Lets put it this way: Wouldn't it be awesome if everyone you signed an agreement with "just signed it"?
- GeorgeTirebiter 15y ago
  That's right, they will sue. My company has been sued several times - so far, we've prevailed, but it takes time and money to defend a suit. MUCH better to avoid if at all possible. I have a corollary: you're not a "real business" until you've been sued. (!)
tjmc 15y ago
This poor advice is like saying you can save money by not paying insurance premiums. Of course you can - until something goes wrong. A better lawyer would have been able to amend that contract with minimal fuss. I used to get a legal briefing on the dodgy parts of the contracts I was asked to sign, along with sensible suggested changes that often benefited both sides (eg. termination clauses more appropriate to the length of the gig) I'd then send through the amended contract and discuss all the reasons for the changes with the client. Never had any problems.
ja27 15y ago
The two contracts I spent the most time going back and forth with before signing were the two biggest wastes of my time. One was a ridiculous NDA with a paranoid guy with delusions that he had the world's best original idea which turned out to be worthless and obvious. The other was a decent gig but they tanked and ran out of cash before I ever got paid. It didn't matter how tight the contract was when there's no money there.
mathattack 15y ago
I think his dad is a good advisor. The reason he was hard to sue is that he's so small. If things went really South on a small project, what's the worst thing that happens? He's 22 and talented in New York - he declares bankruptcy, and gets another job or stays on Dad's couch. This is a situational thing - you can accept liability when the downside is so low. This is why legal departments in small firms are much gentler than legal departments in the Fortune 500. Of course this doesn't work for a large firm, or someone with 3 kids and a mortgage. His dad would have said, "Go get a real job" or something like that. Similar on the hiring - when you're that small, you invite someone to take the risk for you. You can take more risk when there's limited downside. And in this case it was the other guy's downside - if there was no work, he'd be the one in trouble.
- mikealle233 15y ago
  Exactly. Put another way: Odds of getting sued: 1% Max downside if he gets sued: What? 50k before he declares bankruptcy? Ok, so risk adjusted cost of the "just fucking sue me" approach: $500. $500 vs. $350,000...hmmm...tough choice. You might say, well, it's not as though it's one or the other. You can request reasonable changes and not jeopardize the 350k. Well, ya, I suppose so, but what are the odds that any request you make will kill the deal? If it's also 1%, then the expected cost is $3500. That's still more expensive than the "just fucking sue me" approach. In reality, the odds of killing a deal over contract disagreements are much higher than getting sued.
- trocker 15y ago
  Right, how much could that company have sued him for?! Hahhaha, he wouldn't have written this article if not for the risk that he had taken! Its a nice way of telling people -- 'go take risks, be happy man!' :D
nolliesnom 15y ago
Congrats on constructing the perfect troll for this community!
jeremymcanally 15y ago
I agree with the sentiment of this point in general I think. Having counsel read every single contract and letting them wrestle directly with clients is probably a bad idea. Your lawyer will have only your interests in mind (or theirs, who knows?), and it probably won't lead to much productive happening. And even further, taking a few business law classes would be cheaper than using up tons of lawyer hours and probably net a better end result. Anecdotally, At Arcturo, both myself and one of my principal guys have a good bit of contract reading experience (he much much more than myself). Every time I get a contract, I toss it to him and let him give me a thumbs up/down/comment. Having him around to handle reading things over and nit picking (often times to the point of having their lawyers concede points to us they hadn't addressed or thought of) has been awesome. If you can find someone who has a lot of business operations experience and can also hack code, they'll add a LOT of value to your company.
nhangen 15y ago
I took something different from this article, which was that if you wait to do business until you have a sure thing, then you are waiting too long. Take advantage of opportunities, and figure out the details on thew way.
deleted 15y ago
[deleted]
radarsat1 15y ago
Articles like this depress me, because in 1998, I totally knew how to make websites, but didn't know I could make money doing it. Instead I was 18 and doing what I was supposed to do, that is I was busy going to school, and now I'm 31 and still in school not making money. What's wrong with me? Sigh.
- aasarava 15y ago
  It's still possible to make money building web sites, perhaps more so than ever. If you aren't happy with still being in school, why aren't you putting the pieces in place to start your own web development practice?
  - radarsat1 15y ago
    You make a good point. Mostly the answer is that after 10 years I'm definitely going to see this through and finish my degree :) But also, 10 years ago I might have been interested in web development, today I have developed skills in other areas (robotics, embedded programming, etc). It would be a shame not to put them to use. Perhaps more importantly, if I got back into web stuff, I'd be quite far behind in the game; I simply wouldn't have the skills for someone with my experience level. Probably I could get up to speed quickly, but I'd prefer to stick to what I know; there just happens to be so much work in web stuff lately that looking at the job market I sometimes get this omninous feeling that I've been making a mistake... Anyways, looking for work now for when I'm done my degree later this year, so we'll see how it goes. I have an impression that this must be a common feeling for people at the end of their doctoral studies, so I try not to be overly worried.
- cubicle67 15y ago
  hey, you're not alone :) I was in the UK in '99 working a string of crappy low paying jobs whilst reading job ads offering £100,000 + car + rent in London for Y2K work. I never applied for any of them because I didn't consider myself worth that much money Wasn't until years later I found they were taking on pretty much anyone who could turn on a computer. oh well...
- jeffool 15y ago
officemonkey 15y ago
One of my favorite bosses was general counsel for a state government agency. She once told me that "no contract can ensure performance of someone of poor character." Whenever I'm offered a contract, I boil it down like this: "Do I believe they'll hold up their end of the bargain?" If the answer is no, I do not sign the contract.
powertower 15y ago
TL;DR; "Get lucky"... Then walk away with survivor bias.
JoeyDoey 15y ago
Remember watching a vid (1) where Pud explicitly mentioned his mom being said lawyer and his dad (as mentioned in the article) being the entrepreneur. Wonder why he left that out this time. I certainly enjoyed the dichotomy know who his folks were and what role each played. (1) http://vimeo.com/25489184 http://vimeo.com/25489184
- westicle 15y ago
  Certainly puts things in a different perspective. His mother tanked the first deal? So his father told him to fire her? I'd love to be a fly on the wall at that family christmas.
TWSS 15y ago
The interesting part of this from my perspective is "my dad - a lifelong entrepreneur." I recently saw that pud is a year younger than me, and we entered the job market at almost the same time with similar skill sets. Why did it take me so goddamn long to pull my head out of my ass and finally start my own company (at 35)? Perhaps pud's acceptance of risk has a genetic component, or at the very least he was brought up in an environment where he learned to adjust to uncertainty. He credits laziness - but we all know that lazy + smart = effective. I wonder if that's part of entrepreneurial DNA as well...
- gyardley 15y ago
  We don't necessarily need to turn to genetics to explain this. When one of your parents is an entrepreneur, being an entrepreneur yourself is a natural and obvious option -- but when no one in your family has ever started a business, it's anything but. When I was younger, I simply didn't think 'hey, I could start a business' when thinking of things I could do with myself. I wouldn't be so hard on yourself. We're all products of our environment.
Iv 15y ago
> I’m not sure what the lesson is here. The lesson is : you were lucky. You are the prey to some people who look for people like you to sign a contract and then extort money. Saw that happen at a company I worked for.
grellas 15y ago
Contract reviews done by lawyers need to follow good-sense guidelines. Some contracts are routine and don't need any form of customizing. The review in such cases is minimal and can even be skipped if the routine nature of the contract is obvious or if the entrepreneur is seasoned enough to identify a clean situation without lawyer help. Most such routine contracts cover simple cases, such as a simple nda or a recurring situation in which a basic template is used with no material variation apart from non-legal business items that typically get customized in an exhibit. For most cases, though, the whole key to doing a contract right is to customize it properly on its material points. This means it should be clear, it should accurately reflect the intent of the parties, and it should contain basic legal protections for each party. It is vital to this process that both the lawyer and the entrepreneur understand what is material. Why? Because that determines the proper cost-benefit analysis for how it should be reviewed. For example, say a startup is negotiating a 1-year office lease for only a few hundred square feet of space at a modest rental rate. That sort of lease needs very little lawyer review because there is not much at stake (the money is small, the location itself not particularly important to the startup, etc.). A quick read-through by the lawyer is the max that this needs and then only to see if there is anything wildly out of line in the document. What about a 3-year lease with more square footage and a higher rent? In that case, maybe a good high-level review is in order, with comments and mark-ups on a range of important points but little or no attention paid to boilerplate clauses that may be highly unfavorable to the tenant as worded but that are also highly unlikely to occur. And what if the lease is for 5 years with two 5-year options to renew, with a location that is very important to the business involved, and with risks (such as potential environmental liabilities) that can far exceed even the value of the lease itself if mishandled? In that case, lawyer review is normally vital and needs to be pretty thorough (including even haggling over much of the boilerplate language) because it is far more likely that contingent risks can come about over a lengthy period, the amounts at stake are greater, and the lease itself may be important to the business (e.g., a restaurant that depends heavily on having a particular location). This same sort of approach applies to a whole range of contracts. What if your business is getting acquired or if you are buying a business? Well, if it is a little business and the purchase price is very small (say, $50,000), you can very likely be well-served by a canned form used for small business sales (brokers who do these deals use these all the time). Such a form will have basic provisions covered and will usually contain the most important warranties and representations but all of it will be bare-bones. This normally works fine for a small sale. Again, lawyer review can be skipped or done at the quick read-through level. But what if the business you are buying is going to cost you $1,000,000. In that case, you still are in the small-business category but the money is more significant. This likely warrants an intermediate level of lawyer review (contract needs to be customized for the deal, with proper account taken of whether it should be structured as an asset sale, stock sale, or merger - each having different tax consequences - and with careful attention paid to reps and warranties, to conditions for closing, and to collateral matters such as non-compete, etc.). This might take $5K or $10K or sometimes more in lawyer time but it is money normally well spent (it certainly is if you are a small business owner and $1M is a lot of money to put at risk for your situation). And, of course, once you start talking about acquisitions in the tens or hundreds of millions, you need major lawyer time to make sure the complex aspects of such deals are handled properly. What about a license agreement? A small deal, with non-exclusive rights concerning routine IP needs little or no lawyer review. But a core OEM deal involving the licensing of IP that is at the core of your company obviously warrants significant lawyer review, especially if it involves joint development efforts, sweeping indemnification clauses that might trigger major liabilities, or other complications that require sophisticated handling of IP and other rights. Of course, there is also the issue of weasel language and its nasty impact if it is not caught and deleted from any major contract. In short, lawyers and entrepreneurs need to be guided by good sense in handling these matters. It is not good sense simply to act as if lawyers are not needed. It takes only one really bad instance for most entrepreneurs to realize how bad a mistake it is to cut corners in really important matters. On the other hand, letting lawyers run wild with their reviews is foolish as well. Their time must be managed and managed well. It should be used where it matters and curbed where it doesn't. Let the barbs fly, then, but this is one lawyer who will insist that the advice given in this piece may have a grain of truth in it but is too simplistic to cover most serious business affairs. It may work in a number of cases but it can easily get you into trouble. By the way, I am not saying give an open ticket to lawyers. If your lawyer can't make good judgments concerning what is important and what is not, and can't manage time wisely, it is time to get a new lawyer.
n9com 15y ago
This is really dangerous advice
dctoedt 15y ago
Here are some specific contract provisions that can cause real-world problems for your business. (Shameless plug: These are discussed, and illustrated with true stories, in my short e-book, Signing a Business Contract: A Checklist for Greater Peace of Mind, at http://www.ontechnologylaw.com/before-you-sign-a-business-contract-a-five-point-final-checklist-for-business-managers-and-executives/ http://www.ontechnologylaw.com/before-you-sign-a-business-co...) * Most-favored customer clauses * Exclusive-rights provisions * Indemnity obligations * Automatic renewal * Confidentiality obligations (or no confidentiality obligations) * Termination for convenience * Unilateral amendment rights * Best-efforts obligations * Assignment-consent requirements * Non-compete / no-hire / no-solicitation clauses * Tax consequences
tici_88 15y ago
This sort of advise works great until they actually do sue. One of my biggest clients got recently sued by a long term client of his - a Fortune 100 company with all kinds of legal resources. My client had to shut down his business and then scramble to protect his personal assets like house, properties, etc.

695 points by pud 15y ago

Not just a way to run a business, but a way to live life. Might not work for everyone, just as the opposite of whatever this strategy is may not work for everyone.

TomGullen 15y ago

I think the lesson is here it's all fine and dandy until someone does sue you. Then it's a different story.

_delirium 15y ago
If you're a 22-year-old with no assets it's probably not much different; you lose a judgment and declare bankruptcy and that's that. If you're older and have a lot of assets, you just do it via a corporation and it's the same, thanks to the magical unaccountability of the corporate veil.
- tptacek 15y ago
  IANAL, but signing contracts in bad faith may under some circumstances be tortious. Your corporate liability shield probably does not protect you from tort claims. You are shielded far more by your lack of meaningful assets. You aren't worth anything to sue. But there are clients, I promise you, who will turn out to be vindictive. Incidentally, if you're 22 years old, you should still have an LLC.
- veyron 15y ago
  Nowadays a lot of companies try to add clauses that pierce the corporate veil (for example, having personal guarantees)
  - learc83 15y ago
    For all kinds of things, like leases and such were the company is too young to have any credit. But a personal guarantee on delivering a website on time would be a bit much.
    - veyron 15y ago
      For longer projects, you should be asking for some sort of upfront payment (to avoid being screwed over -- i learned that the hard way). In that circumstance, companies may demand some sort of clawback if benchmarks aren't met.
- citricsquid 15y ago
  bankruptcy (at least here in England) means you're royally fucked, especially at 22.
  - _delirium 15y ago
    In the U.S. it depends somewhat; if you have a place to rent (e.g. know your landlord or it's via a friend) it's not a huge deal. You won't get a mortgage, and it'll make getting new credit cards or rentals from strangers harder, but not life-ending. Especially if you have a glamorous story behind it, like going bankrupt due to your tech startup being sued into oblivion...

toast76 15y ago

Just change that one line "He was right. I got the job, they paid, things went well, nobody got sued." to "He was wrong. I got the job, they didn't pay, things went horribly wrong, everybody go sued".

gnu6 15y ago
Even if it were changed to that, the story wouldn't end with "I couldn't buy food, my macbook pro got repossessed, and I went to federal pound-you-in-the-ass prison." If you do get sued and your business collapses you can always start another one.
- analyst74 15y ago
  Personal liability would be a nasty thing to deal with after your business failed. And you may not get to start another company with a huge personal debt.
  - nknight 15y ago
    I wouldn't sign a contract for personal liability on something that big, but bankruptcy law exists for a reason.
    - vacri 15y ago
      Didn't the US essentially nullify bankruptcy laws towards Bush's second term? As in, you can declare bankruptcy, but it doesn't clear your debts?
      - nknight 15y ago
        Uh, no. You're thinking of BAPCPA, which sucked, but was a far cry from what you're suggesting. Chapter 7 (straight liquidation) is harder but still very possible, especially if you've just been slapped with a multimillion-dollar verdict, while Chapter 13 (individual reorg) came out mostly intact, and 13 does result in discharges (but there are limits to the amount of debt you can have and qualify for 13). BAPCPA: http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and... Chapter 7: http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_States_Code http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_Sta... Chapter 13: http://en.wikipedia.org/wiki/Chapter_13,_Title_11,_United_States_Code http://en.wikipedia.org/wiki/Chapter_13,_Title_11,_United_St...

petegrif 15y ago

Great post. :)

SomeCallMeTim 15y ago

I still show my contracts to my lawyer, and sometimes really fight for certain clauses, but I'm realistic: Sometimes having a signed contract is more important to me than certain categories of unlikely risk mitigation. If you have the luxury of leverage -- the ability and willingness to walk away if the contract isn't perfect -- then yes. Hammer it out to protect your interests. But if the contract is critical to the company's survival, then he's right: Just sign it. It's better to have an income from an imperfect contract, then no company at all because you've run out of money.

egiva 15y ago
Me too, although I think that contracts are only worth how much money you're willing to spend to defend them with lawyers, court costs, etc. Good customer service gets you out of most predicaments, so I review the contract but spend more time worrying about how to serve my customers.
epo 15y ago
My experience is that the people who jerk you around with contracts are usually bad payers. If it's a bad contract then the prospect of income is very uncertain. Business ultimately relies in trust, if they give you a poor contract then it is a strong reason not to trust them over anything.
- SomeCallMeTim 15y ago
  I went back and forth with one client for about five months on a contract worth about $300k. They actually started PAYING me on milestones well before the contract was signed. We didn't nail down a final version until just before the last milestone payment. They paid in full, no delays -- they even paid extra for when they wanted additional changes out of scope. In my industry (games), it's actually quite common to start work on a contract before it's signed. They were a rather large company, granted. But yes, don't DO a lot of work for someone you neither trust nor have a solid contract with. If the contract allows them to weasel out of giving you any money at all after you've put significant time and resources into it, then that would be qualify as "I sometimes really fight for certain clauses". Ownership of IP is another critical nonnegotiable for me: If I have a library that I own and I'm using it in someone's product, it's going to be spelled out in the contract that I still own it (work for hire notwithstanding), or I'm not signing. But if you're talking about unbalanced boilerplate legalese (nonreciprocal indemnification or nondisclosure, or clauses that otherwise aren't ideal according to your legal counsel), then I still agree with the article.

tptacek 15y ago

Ugh. At one extreme: giving your counsel veto power over what contracts you sign, and allowing them to bill time ping-ponging contracts until prospects give up. At the other extreme: just signing everything and saying "fucking sue me" when things go sideways. You should be somewhere in the middle. Contracts more often than not have provisions that are silly for you to accept verbatim. And, contracts more often than not have provisions you'd rather not accept, but that are baked into your prospect's own processes and not changeable. No matter what you do, if you're being sensible, there are going to be tough decisions to make every once in awhile. If there aren't, you're probably doing something wrong. Like, for instance, signing tens of different contracts from giant companies without any legal review.

Duff 15y ago
You need to be able to figure out what's negotiable and what isn't. I work for one of those massive organizations that everyone hates doing business with, but sort of has to. I've watched dozens of vendors spin their wheels for months over boilerplate stuff that nobody is empowered to change. They ultimately lose the deal over something that ultimately didn't matter.
- tptacek 15y ago
  It's absolutely true. You have to figure out what terms are changeable and which ones aren't, and you have to know that sometimes you'll be accepting things you really don't want to, which means accepting risks, sometimes serious risks. But having said all that: in almost every contract, there's something crappy that can be changed.
  - politician 15y ago
    Unless you're renting an apartment in Austin.
nirvana 15y ago
I think the point to "fucking sue me" is that you don't "fucking sue" someone over something trivial. So, if the dollar value of some provision in the contract is not worth the cost of a lawsuit, in a way, it is kinda immaterial to the agreement because it would cost more to collect. So, I think the article is trying to hit the middle road you're advocating, though didn't make it as explicitly clear as it could have.

compay 15y ago

"Just be lucky like I was" is rather poor advice.

compay 15y ago
To clarify though, I believe the success he's had is most certainly NOT luck but rather hard work and merit. My comment was referring just to that specific article.
nknight 15y ago
Did you read the very last line of his post? "I’m not sure what the lesson is here." I don't see him giving advice to anybody. I see him recounting some rather... debatable decisions early in his career.
- compay 15y ago
  Yeah, but if you're recounting what has worked well for you in your career, you're giving advice - even if you qualify it at the last minute with a totally wishy washy ending like that. Also, if you've followed Kaplan since his (awesome) "Fucked Company" website you'll know that the man is no babe in the woods. IMO he has too good a grasp on the nature and consequences of risk to be "not sure" what the lesson is here.

taariqlewis 15y ago

When there's nothing to lose, there's everything to gain, but when there's everything to lose, there's alot more lawyering that will keep yer nose clean if something eventually goes south. Get a lawyer when there's really something to lose.

joshfraser 15y ago

You have to balance your risk and reward and take the biggest risks when you have little to lose. The riskiest thing you can do is play it safe.

nicksergeant 15y ago
I know it feels good to think this, but often times playing it safe is not the riskiest thing to do. Climbing the corporate ladder, being smart with investments, and doing the right things financially are considered "playing it safe" and would be viewed considerably less risky than alternatives.

owenmarshall 15y ago

> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast. > “Worry about that in 2 months,” Dad said. Speaking from the perspective of that employee, fuck you. OK, for the serious point: you may be not give a shit about risk. Good for you, you crazy risk taker! The world truly needs more people like you. But for me? I've got a mortgage and a car payment and a wife who is trying to go through graduate school. I need to know that my ass isn't going to come into work on the 61st day and hear you say "Well, looks like we're outta cash -- sorry buddy..." If, on the other hand, you share that risk with me up front, thanks -- you're a good boss.

brk 15y ago
Then don't be employee #1. Ever. I get your point, but if those things are true, then that would not be the proper job for you to take, no matter how risk prone or risk averse the founder is.
- rick888 15y ago
  Being employee #1 is the worst of both worlds. You get the risk of a startup and you most likely will get very little payout if the startup is successful. Most of the people I know that were employee #1 got nothing.
  - lojack 15y ago
    That's reassuring. (putting in my two weeks notice tomorrow to be employee #1)
    - semanticist 15y ago
      Make sure that you'd be happy if you worked long and hard for the start-up and all you got was the salary they're paying you + the experience. Even if the start-up is a huge success, the chances of you making substantial amounts of money are low, unless you have founder-level equity.

nandemo 15y ago

> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast. > “Worry about that in 2 months,” Dad said. This seems really dishonest. Yeah, everybody knows that startups are risky, but if you can't afford to pay more than 2 months of salary, then don't hire a full-timer. Either find a co-founder or hire a contractor instead.

pud 15y ago
Not many companies could afford to pay their entire payroll for a quarter, if sales were $0.00 for that quarter.
- xorglorb 15y ago
  Most companies also have steady revenue streams.
  - mkopinsky 15y ago
    Or at least revenue forecasts.
- nandemo 15y ago
  Like other comments said, any company should have a revenue forecast. Companies that don't have a steady revenue stream will have enough cash from either capital reserves or financing. If you don't then don't hire a employee. Companies that already have employees and forecast they cannot make payroll (say) 6 months from now will typically either borrow money or start lay-offs, not hire more people and worry about later. Failing to pay wages is a serious problem.

revorad 15y ago

I once rode a motorbike drunk, with a stranger sitting behind me. We didn't die. Lesson learnt: I got lucky. I don't drive drunk any more :-)

m0shen 15y ago

Sounds like the opposite advice to: http://www.vimeo.com/22053820 http://www.vimeo.com/22053820 (Fuck you, pay me). Should have found a better lawyer.

nirvana 15y ago

I wish someone would write an expert system that works like his dad. Something that had some validation of what was a worthwhile risk and what was a risk that even if you tried to mitigate the risk really would still be a risk. (For instance, even if you had enough work to presume you could employ that employee for more than 2 months, that's not a guarantee. What if the contract with a customer was for 12 months, but 2 months in, right after staffing up, they just cancelled it and said "fucking sue me"? Kinda hard for the small startup to sue... and if they did, and they won, that win would be years after they had to let the employees go.) You can't mitigate all risk, and being able to ignore the ones that you can't' do anything about is an important skill. This goes for technical risk as well. I try not to over-architect. I spend a lot of time trying to decide which things need to be handled now, and which things can just be added later.

shawnee_ 15y ago

The lesson here: it was 1998. "The industry" was still a little fledgling, so the legal territory was still largely unchartered. But it grew into an ugly duckling, quickly. Sent the contract to my lawyer. She marked it up, sent it to the client. Then the client marked it up and sent it back to my lawyer. And so on, back and forth for almost a month. Garbage in, garbage out. During the "ugly duckling" phase, the legal machine is just learning that it can spew garbage. It tests its limits. Just how much garbage can it spit before something happens? When the garbage is between private parties? Apparently, a lot. I charged my first client $1,400. My second client paid $5,400. The next paid $24,000. I remember the exact amounts — they were the largest checks I’d seen up til that point. Then I wrote a proposal for $340,000... The Bust was just growing pains. It probably could be reasonably argued that the industry is still in an ugly duckling phase (multi-Billion dollar valuations, really?) But this is part of growing up. In Code and Other Laws of Cyberspace Lessig writes: It is a lack of a certain kind of regulation that produced the Y2K problem, not too much regulation. An overemphasis on the private got us here, not an overly statist federal government. Were the tort system better at holding producers responsible for the harms they create, code writers and their employers would have been more concerned with the harm their code would create. Were contract law not so eager to allow liability in economic transactions to be waived, the licenses that absolved the code writers of any potential liability from bad code would not have induced an even greater laxity in what these code writers were producing. And were the intellectual property system more concerned with capturing and preserving knowledge than with allowing private actors to capture and preserve profit, we might have had a copyright system that required the lodging of source code with the government before the protection of copyright was granted, thus creating an incentive to preserve source code and hence create a resource that does not now exist but that we might have turned to in undoing the consequences of this bad code. If in all these ways government had been different, the problems of Y2K would have been different as well. [source: http://www.code-is-law.org/conclusion_excerpt.html http://www.code-is-law.org/conclusion_excerpt.html] This is dated (1999), but interesting. He was wrong about Y2K, of course, but not about the underlying issues and problems with contract law and IP.

fleitz 15y ago
Why would a coder ever be held responsible for something not specified in the requirements doc? If people wanted Y2K compliant software in the 70s and 80s they should have specified it. As for multibillion dollar valuations, what's wrong with the valuations on MSFT, AAPL, GOOG? If you think the PE is crazy on LNKD, just short it. As for what VCs are willing to invest for particular companies those investments are more anecdotes than data.

EGreg 15y ago

If you are the small guy, then try to get YOUR document to be the starting point. Use YOUR law firm to write it. Go to a law firm and tell them to use something from a similar contract before. If you expect there will be negotiations, basically try to use and re-use your standard document. You are going to be in this business for a while, hopefully. So you only have to pay for your standard document once. Plus you'll know the ins and outs of it better than anyone else. I think the right solution these days is to insist on standard documents and focus on the amendments rather than getting something from scratch. There is a good list of documents to form startups, for example, here: http://www.avc.com/a_vc/2010/03/standardized-venture-funding-docs.html http://www.avc.com/a_vc/2010/03/standardized-venture-funding... Similarly there are things at legalzoom and other places. I realize that sometimes the big company will insist on going with their standard contract, but if they were really that adamant, they wouldn't let you go back and forth with your lawyer too much. Just start with your own document or walk away if you don't want to take the risk.

ditojim 15y ago

sounds like your dad had faith in you, above all. don't misinterpret this as careless disregard for risk.

AJ007 15y ago

Linkbait. Some of my competitors write contracts specifically so that they can sue other companies. How about this, I fucking read my contracts and I don't sign bullshit.

barefoot 15y ago
Thanks for sharing this. Do you have any tips for things to look out for?
- GeorgeTirebiter 15y ago
  The main thing I look for is unknowable downside. For example, when a big company asks my small company to indemnify them, I always limit the indemnification to whatever they paid for the work. If they don't like that, then I get a different client. ALSO, NEVER let lawyers run the show. Lawyers are your water boys/girls -- they do what YOU want them to do. If they don't, then get a different lawyer. YOU have to read and understand everything in a contract -- and lawyers can help you do that. But in general, you tell your lawyer what you want, and she does it. End of story.
rhizome 15y ago
Keep in mind that Pud is the original Mike Arrington.

wglb 15y ago

Well, your business may well not be like his business. First, it was all new then, and the first half of the swhoosh to the top. But being of the conservative sort, I have generally had a lawyer review whatever contracts people want me to sign, firstly for him to explain what it really means--what are the actual risks. Even as a very young fellow in my first one with a contract, I knew enough that it was for me to make the business decision and for my lawyer to explain what the legal ins and outs were. Then there was the fellow who liked to do negotiation by contract. It said that everything that I did they owned, probably back a year before I started, and that if I didn't perform the would take my house and my first born, but then on the second page they said that we are kidding about the house. And it was from a law firm that was bigger than most buildings, and Very Famous. But I pushed back and after a couple of cycles got things to be in a reasonable state. In another long-term consulting contract negotiation, my lawyer's first response after reading it was one word "Egregious". Fortunately, I was able to hammer that into better shape. This was one where the contract was supposedly non-negotiable. I learned something there. But in no world that I am familiar with does it make sense for the lawyer to do the negotiation. They (in all likelihood) don't understand your business as well as you do. Even though I have been doing this for a while now, I wouldn't sign anything without a lawyer's review. But I have also been at the other extreme, where there was no contract for a multi-year deal and it worked out well. Use a lawyer, but use the lawyer wisely.

mmaunder 15y ago

Two things: 1. They will sue. Medium to large - in fact any mature business, considers lawyers and the threat of lawsuits and litigation as a cost of doing business. They don't get emotionally involved, they just do it. FYI, looking at lawyers & legal as cost of doing biz is a healthy attitude and may save you a heart attack. 2. Telling someone to just "fucking sue me" or simply "sue me" makes it combative and I made this beginner mistake early on in being a CEO. I actually simply asked their lawyer if he thought his case "actually has any merit?" in a cocky tone in a phone call. Turns out he thought it did. Once I had capable council on my side she had to work hard to make nice with the other side and bring it to settlement hours before we were irrevocably committed to litigating the issue. Lets put it this way: Wouldn't it be awesome if everyone you signed an agreement with "just signed it"?

GeorgeTirebiter 15y ago
That's right, they will sue. My company has been sued several times - so far, we've prevailed, but it takes time and money to defend a suit. MUCH better to avoid if at all possible. I have a corollary: you're not a "real business" until you've been sued. (!)

tjmc 15y ago

This poor advice is like saying you can save money by not paying insurance premiums. Of course you can - until something goes wrong. A better lawyer would have been able to amend that contract with minimal fuss. I used to get a legal briefing on the dodgy parts of the contracts I was asked to sign, along with sensible suggested changes that often benefited both sides (eg. termination clauses more appropriate to the length of the gig) I'd then send through the amended contract and discuss all the reasons for the changes with the client. Never had any problems.

ja27 15y ago

The two contracts I spent the most time going back and forth with before signing were the two biggest wastes of my time. One was a ridiculous NDA with a paranoid guy with delusions that he had the world's best original idea which turned out to be worthless and obvious. The other was a decent gig but they tanked and ran out of cash before I ever got paid. It didn't matter how tight the contract was when there's no money there.

mathattack 15y ago

I think his dad is a good advisor. The reason he was hard to sue is that he's so small. If things went really South on a small project, what's the worst thing that happens? He's 22 and talented in New York - he declares bankruptcy, and gets another job or stays on Dad's couch. This is a situational thing - you can accept liability when the downside is so low. This is why legal departments in small firms are much gentler than legal departments in the Fortune 500. Of course this doesn't work for a large firm, or someone with 3 kids and a mortgage. His dad would have said, "Go get a real job" or something like that. Similar on the hiring - when you're that small, you invite someone to take the risk for you. You can take more risk when there's limited downside. And in this case it was the other guy's downside - if there was no work, he'd be the one in trouble.

mikealle233 15y ago
Exactly. Put another way: Odds of getting sued: 1% Max downside if he gets sued: What? 50k before he declares bankruptcy? Ok, so risk adjusted cost of the "just fucking sue me" approach: $500. $500 vs. $350,000...hmmm...tough choice. You might say, well, it's not as though it's one or the other. You can request reasonable changes and not jeopardize the 350k. Well, ya, I suppose so, but what are the odds that any request you make will kill the deal? If it's also 1%, then the expected cost is $3500. That's still more expensive than the "just fucking sue me" approach. In reality, the odds of killing a deal over contract disagreements are much higher than getting sued.
trocker 15y ago
Right, how much could that company have sued him for?! Hahhaha, he wouldn't have written this article if not for the risk that he had taken! Its a nice way of telling people -- 'go take risks, be happy man!' :D

nolliesnom 15y ago

Congrats on constructing the perfect troll for this community!

jeremymcanally 15y ago

I agree with the sentiment of this point in general I think. Having counsel read every single contract and letting them wrestle directly with clients is probably a bad idea. Your lawyer will have only your interests in mind (or theirs, who knows?), and it probably won't lead to much productive happening. And even further, taking a few business law classes would be cheaper than using up tons of lawyer hours and probably net a better end result. Anecdotally, At Arcturo, both myself and one of my principal guys have a good bit of contract reading experience (he much much more than myself). Every time I get a contract, I toss it to him and let him give me a thumbs up/down/comment. Having him around to handle reading things over and nit picking (often times to the point of having their lawyers concede points to us they hadn't addressed or thought of) has been awesome. If you can find someone who has a lot of business operations experience and can also hack code, they'll add a LOT of value to your company.

nhangen 15y ago

I took something different from this article, which was that if you wait to do business until you have a sure thing, then you are waiting too long. Take advantage of opportunities, and figure out the details on thew way.

deleted 15y ago

[deleted]

radarsat1 15y ago

Articles like this depress me, because in 1998, I totally knew how to make websites, but didn't know I could make money doing it. Instead I was 18 and doing what I was supposed to do, that is I was busy going to school, and now I'm 31 and still in school not making money. What's wrong with me? Sigh.

aasarava 15y ago
It's still possible to make money building web sites, perhaps more so than ever. If you aren't happy with still being in school, why aren't you putting the pieces in place to start your own web development practice?
- radarsat1 15y ago
  You make a good point. Mostly the answer is that after 10 years I'm definitely going to see this through and finish my degree :) But also, 10 years ago I might have been interested in web development, today I have developed skills in other areas (robotics, embedded programming, etc). It would be a shame not to put them to use. Perhaps more importantly, if I got back into web stuff, I'd be quite far behind in the game; I simply wouldn't have the skills for someone with my experience level. Probably I could get up to speed quickly, but I'd prefer to stick to what I know; there just happens to be so much work in web stuff lately that looking at the job market I sometimes get this omninous feeling that I've been making a mistake... Anyways, looking for work now for when I'm done my degree later this year, so we'll see how it goes. I have an impression that this must be a common feeling for people at the end of their doctoral studies, so I try not to be overly worried.
cubicle67 15y ago
hey, you're not alone :) I was in the UK in '99 working a string of crappy low paying jobs whilst reading job ads offering £100,000 + car + rent in London for Y2K work. I never applied for any of them because I didn't consider myself worth that much money Wasn't until years later I found they were taking on pretty much anyone who could turn on a computer. oh well...
jeffool 15y ago

officemonkey 15y ago

One of my favorite bosses was general counsel for a state government agency. She once told me that "no contract can ensure performance of someone of poor character." Whenever I'm offered a contract, I boil it down like this: "Do I believe they'll hold up their end of the bargain?" If the answer is no, I do not sign the contract.

powertower 15y ago

TL;DR; "Get lucky"... Then walk away with survivor bias.

JoeyDoey 15y ago

Remember watching a vid (1) where Pud explicitly mentioned his mom being said lawyer and his dad (as mentioned in the article) being the entrepreneur. Wonder why he left that out this time. I certainly enjoyed the dichotomy know who his folks were and what role each played. (1) http://vimeo.com/25489184 http://vimeo.com/25489184

westicle 15y ago
Certainly puts things in a different perspective. His mother tanked the first deal? So his father told him to fire her? I'd love to be a fly on the wall at that family christmas.

TWSS 15y ago

The interesting part of this from my perspective is "my dad - a lifelong entrepreneur." I recently saw that pud is a year younger than me, and we entered the job market at almost the same time with similar skill sets. Why did it take me so goddamn long to pull my head out of my ass and finally start my own company (at 35)? Perhaps pud's acceptance of risk has a genetic component, or at the very least he was brought up in an environment where he learned to adjust to uncertainty. He credits laziness - but we all know that lazy + smart = effective. I wonder if that's part of entrepreneurial DNA as well...

gyardley 15y ago
We don't necessarily need to turn to genetics to explain this. When one of your parents is an entrepreneur, being an entrepreneur yourself is a natural and obvious option -- but when no one in your family has ever started a business, it's anything but. When I was younger, I simply didn't think 'hey, I could start a business' when thinking of things I could do with myself. I wouldn't be so hard on yourself. We're all products of our environment.

Iv 15y ago

> I’m not sure what the lesson is here. The lesson is : you were lucky. You are the prey to some people who look for people like you to sign a contract and then extort money. Saw that happen at a company I worked for.

grellas 15y ago

Contract reviews done by lawyers need to follow good-sense guidelines. Some contracts are routine and don't need any form of customizing. The review in such cases is minimal and can even be skipped if the routine nature of the contract is obvious or if the entrepreneur is seasoned enough to identify a clean situation without lawyer help. Most such routine contracts cover simple cases, such as a simple nda or a recurring situation in which a basic template is used with no material variation apart from non-legal business items that typically get customized in an exhibit. For most cases, though, the whole key to doing a contract right is to customize it properly on its material points. This means it should be clear, it should accurately reflect the intent of the parties, and it should contain basic legal protections for each party. It is vital to this process that both the lawyer and the entrepreneur understand what is material. Why? Because that determines the proper cost-benefit analysis for how it should be reviewed. For example, say a startup is negotiating a 1-year office lease for only a few hundred square feet of space at a modest rental rate. That sort of lease needs very little lawyer review because there is not much at stake (the money is small, the location itself not particularly important to the startup, etc.). A quick read-through by the lawyer is the max that this needs and then only to see if there is anything wildly out of line in the document. What about a 3-year lease with more square footage and a higher rent? In that case, maybe a good high-level review is in order, with comments and mark-ups on a range of important points but little or no attention paid to boilerplate clauses that may be highly unfavorable to the tenant as worded but that are also highly unlikely to occur. And what if the lease is for 5 years with two 5-year options to renew, with a location that is very important to the business involved, and with risks (such as potential environmental liabilities) that can far exceed even the value of the lease itself if mishandled? In that case, lawyer review is normally vital and needs to be pretty thorough (including even haggling over much of the boilerplate language) because it is far more likely that contingent risks can come about over a lengthy period, the amounts at stake are greater, and the lease itself may be important to the business (e.g., a restaurant that depends heavily on having a particular location). This same sort of approach applies to a whole range of contracts. What if your business is getting acquired or if you are buying a business? Well, if it is a little business and the purchase price is very small (say, $50,000), you can very likely be well-served by a canned form used for small business sales (brokers who do these deals use these all the time). Such a form will have basic provisions covered and will usually contain the most important warranties and representations but all of it will be bare-bones. This normally works fine for a small sale. Again, lawyer review can be skipped or done at the quick read-through level. But what if the business you are buying is going to cost you $1,000,000. In that case, you still are in the small-business category but the money is more significant. This likely warrants an intermediate level of lawyer review (contract needs to be customized for the deal, with proper account taken of whether it should be structured as an asset sale, stock sale, or merger - each having different tax consequences - and with careful attention paid to reps and warranties, to conditions for closing, and to collateral matters such as non-compete, etc.). This might take $5K or $10K or sometimes more in lawyer time but it is money normally well spent (it certainly is if you are a small business owner and $1M is a lot of money to put at risk for your situation). And, of course, once you start talking about acquisitions in the tens or hundreds of millions, you need major lawyer time to make sure the complex aspects of such deals are handled properly. What about a license agreement? A small deal, with non-exclusive rights concerning routine IP needs little or no lawyer review. But a core OEM deal involving the licensing of IP that is at the core of your company obviously warrants significant lawyer review, especially if it involves joint development efforts, sweeping indemnification clauses that might trigger major liabilities, or other complications that require sophisticated handling of IP and other rights. Of course, there is also the issue of weasel language and its nasty impact if it is not caught and deleted from any major contract. In short, lawyers and entrepreneurs need to be guided by good sense in handling these matters. It is not good sense simply to act as if lawyers are not needed. It takes only one really bad instance for most entrepreneurs to realize how bad a mistake it is to cut corners in really important matters. On the other hand, letting lawyers run wild with their reviews is foolish as well. Their time must be managed and managed well. It should be used where it matters and curbed where it doesn't. Let the barbs fly, then, but this is one lawyer who will insist that the advice given in this piece may have a grain of truth in it but is too simplistic to cover most serious business affairs. It may work in a number of cases but it can easily get you into trouble. By the way, I am not saying give an open ticket to lawyers. If your lawyer can't make good judgments concerning what is important and what is not, and can't manage time wisely, it is time to get a new lawyer.

n9com 15y ago

This is really dangerous advice

dctoedt 15y ago

Here are some specific contract provisions that can cause real-world problems for your business. (Shameless plug: These are discussed, and illustrated with true stories, in my short e-book, Signing a Business Contract: A Checklist for Greater Peace of Mind, at http://www.ontechnologylaw.com/before-you-sign-a-business-contract-a-five-point-final-checklist-for-business-managers-and-executives/ http://www.ontechnologylaw.com/before-you-sign-a-business-co...) * Most-favored customer clauses * Exclusive-rights provisions * Indemnity obligations * Automatic renewal * Confidentiality obligations (or no confidentiality obligations) * Termination for convenience * Unilateral amendment rights * Best-efforts obligations * Assignment-consent requirements * Non-compete / no-hire / no-solicitation clauses * Tax consequences

tici_88 15y ago

This sort of advise works great until they actually do sue. One of my biggest clients got recently sued by a long term client of his - a Fortune 100 company with all kinds of legal resources. My client had to shut down his business and then scramble to protect his personal assets like house, properties, etc.