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It feels to me like where this is going to fall down is first contact with any business term that isn’t neatly covered by one of the form agreements. Not to say

It feels to me like where this is going to fall down is first contact with any business term that isn’t neatly covered by one of the form agreements. Not to say that this can’t be great for ordinary course arrangements that neatly fit within one of the defined buckets, but I’d be pretty wary (as either a business or a legal advisor) of any impulse to fit even a minimally bespoke deal into one of these templates. Contracts exist in a weird state of counterpoise where they’re both supremely important (even the oft-maligned “boilerplate”) and totally inessential to the achievement of practical business objective. I’ve had clients sign contracts for nine-figure deals where no one has ever read the agreement after closing. But as soon as there’s a mismatch between the commercial expectations on either side, then every word matters. And it’s just hard for me to understand how this is going to capture all the nuances of arrangements among sophisticated commercial parties. For instance, I saw on the site, several variations of alternative anti-assignment provisions. OK, so either the contact can or cannot be assigned. Simple enough. Does it also prohibit an assignment of the contract if the company is sold via a sale of all assets? (Should an ordinary course commercial contract really purport to dictate the form of a corporate-level transaction?) What about a pledge to secure debt? What about in an assignment for the benefit of creditors? What about an internal reorganization or transfer to an affiliate? What about a merger? What if the company issues new stock representing 19.99% ownership? 49%? 51%? And so on and so on ad nauseam. Maybe these are all in fact selectable boxes and there’s language that addresses each of these fact patterns. But even aside from agreed language that, let’s assume, is good enough to implement the business understanding in each of these scenarios, these are weighty commercial decisions that require careful consideration.

nocoiner 3y ago
I just re-read the parent post, and was really struck by the reference to “documents filled with unstructured text.” I mean, that’s exactly what commercial contracting is - it doesn’t easily map to a simple schema outside very, very basic transactions. Fundraising and the SAFE is different because that transaction is really one of the simpler ones at the end of the day - $x for y% of the company based on a valuation cap of $z. Typically the issuer is a Delaware corp, so investors can rely on the fiduciary statutory and common law overlay. But if it were structured as an investment in an LLC, or a debt financing, where all the rights are basically purely contractual, documenting that deal becomes much more difficult. I’m not trying to put words in your mouth and saying that’s the problem you’re trying to solve, because I don’t think it is. But the reference to the SAFE is misleading because I think that’s one of the “easier” commercial transactions, and most legal documentation is complicated because the underlying deal is complicated.
- jakestein 3y ago
  I agree that a cloud service agreement is more complicated than a SAFE, and that's a result of the fact that the underlying deal is more complicated. We use the SAFE as an example of a standard contract because it's one that our target users are familiar with. We believe that there are a lot of lessons worth learning from the SAFE's success, along with other standard contracts like the NVCA Model Docs, IAB Standard Terms, ISDA Master Agreement, etc. Our users have signed thousands of contracts and closed millions of dollars of deals, so it's working for at least some commercial contracts. Of course, this is a tiny percentage of the overall market. Our bet is that it can become a much larger portion of the market, even if it doesn't get to 100%
jakestein 3y ago
There will definitely be deals where the standard agreements don't cover every term that is important to the parties involved. We have a few ways to address the kinds of nuances you're talking about. The variables in the cover page are intended to handle the things that vary from deal to deal in most commercial software transactions. Those are basically the selectable boxes you referred to (or blanks to be filled in, etc). For things not captured by those variables, there's a section on the bottom of the cover page called "Other changes to the standard terms." Users often choose an entry from the Language Library for that section, but they (or their attorneys) can write their own custom assignment language or whatever other specific term they need. If there are a small number of edits in the "Other changes" section, it can be helpful to know that all of your agreements have their unusual elements in the same section. On the other hand, if a company or their attorney consistently needs to make a large number of edits in that section, it might be a sign that the standard contracts are not a fit for them. When that does happen, we'd love to hear about it. That sort of thing is very helpful for us in thinking about what we can improve in future versions.

nocoiner 3y ago

I just re-read the parent post, and was really struck by the reference to “documents filled with unstructured text.” I mean, that’s exactly what commercial contracting is - it doesn’t easily map to a simple schema outside very, very basic transactions. Fundraising and the SAFE is different because that transaction is really one of the simpler ones at the end of the day - $x for y% of the company based on a valuation cap of $z. Typically the issuer is a Delaware corp, so investors can rely on the fiduciary statutory and common law overlay. But if it were structured as an investment in an LLC, or a debt financing, where all the rights are basically purely contractual, documenting that deal becomes much more difficult. I’m not trying to put words in your mouth and saying that’s the problem you’re trying to solve, because I don’t think it is. But the reference to the SAFE is misleading because I think that’s one of the “easier” commercial transactions, and most legal documentation is complicated because the underlying deal is complicated.

jakestein 3y ago
I agree that a cloud service agreement is more complicated than a SAFE, and that's a result of the fact that the underlying deal is more complicated. We use the SAFE as an example of a standard contract because it's one that our target users are familiar with. We believe that there are a lot of lessons worth learning from the SAFE's success, along with other standard contracts like the NVCA Model Docs, IAB Standard Terms, ISDA Master Agreement, etc. Our users have signed thousands of contracts and closed millions of dollars of deals, so it's working for at least some commercial contracts. Of course, this is a tiny percentage of the overall market. Our bet is that it can become a much larger portion of the market, even if it doesn't get to 100%

jakestein 3y ago

There will definitely be deals where the standard agreements don't cover every term that is important to the parties involved. We have a few ways to address the kinds of nuances you're talking about. The variables in the cover page are intended to handle the things that vary from deal to deal in most commercial software transactions. Those are basically the selectable boxes you referred to (or blanks to be filled in, etc). For things not captured by those variables, there's a section on the bottom of the cover page called "Other changes to the standard terms." Users often choose an entry from the Language Library for that section, but they (or their attorneys) can write their own custom assignment language or whatever other specific term they need. If there are a small number of edits in the "Other changes" section, it can be helpful to know that all of your agreements have their unusual elements in the same section. On the other hand, if a company or their attorney consistently needs to make a large number of edits in that section, it might be a sign that the standard contracts are not a fit for them. When that does happen, we'd love to hear about it. That sort of thing is very helpful for us in thinking about what we can improve in future versions.