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This doesn't make sense to me. Fundamentally, you either have a signed legal contract, or you 'just' have a verbal agreement aka handshake deal. The problem tha

by apalmer 14y ago

This doesn't make sense to me. Fundamentally, you either have a signed legal contract, or you 'just' have a verbal agreement aka handshake deal. The problem that this supposedly solves, is that verbal agreements are non binding and leave wiggle room. If you cant trust the other party, the only recourse is the full legal contract. If you can trust the party then the handshake and the intention is enough. Further more even handshake deals made by trustworthy agents with the best intentions sometimes fall apart before the full legal contract is signed. This will never go away. Bottomline, handshake deals work in situations where the reputation of the individuals with each other is more valuable than the benefit of breaking a given handshake deal. Its just game theory really. Further if the protocol did get buy in and become widespread, it will eventually reach a point where there are true legal ramifications for breaking a handshake deal. At which point everyone will (and should) refuse to make these deals for the same reason no one signs million dollar contracts without having the lawyers review the details.

larrys 14y ago
Agree in general but note that it allows the investors who agree to use this framework the ability to put FUD into the minds of founders who deal with investors who don't. Especially with startups with so many newly minted noobies coming on board every day who don't have any history or business knowledge they will soon might accept that this is the way "business has always been done".
karamazov 14y ago
Verbal contracts are fuzzy. They rely on reputation, and an investor's reputation won't take a substantial hit from a "he-said she-said" situation. Having the agreement recorded in writing might not be legally enforceable, but it makes it clear that there was a concrete agreement in the first place.
icegreentea 14y ago
As pointed out elsewhere in the thread, verbal agreements that contain all the other aspects of a valid (for example written) contract is infact every bit as binding as a written version providing you can prove it occurred. You can do this all sorts of ways - witnesses for examples. The wiggle room that enters verbal agreements are typically not the result of it being a verbal agreement, but that verbal agreements are typically more concise than written agreements, and therefore lack the specificity and breathe. In summary, a concept of a legal contract is largely abstracted away from the medium it is expressed it. The medium only effects the ease at which you can prove that your version of the contract is infact the version that both parties agreed to.
- apalmer 14y ago
  I understand completely verbal contracts are enforceable if all the 'wiggle room' is squeezed out, by specifying in detail the specifics of the contract and witnesses to remove the 'he said she said'. That's all a written contract with all the legalese and signatures in triplicate etc really provides. My point is IF you create a handshake protocol that meets all the criteria to be fully 'enforceable', no one will actually partake, because business people do not enter legally binding contracts without lawyers reviewing etc. The handshake deal in addition to the legal aspect really requires a level of trust. a handshake deal works because both parties trust the other really is making a deal, that both parties are operating in good faith, AND that if their is some technicality does occur they can still back out, but trust exists that neither party will back out unless such a technicality does occur.
eli 14y ago
Raising money relies on trust. If you don't have any faith in the other party holding up their end of the deal, the contract doesn't matter and you should probably reconsider the transaction. In practice, you can get pretty jammed up regardless of what the contract says.
joonix 14y ago
Sorry but this is completely incorrect. Oral agreements are just as valid under the law (except where something called the Statute of Frauds comes into play) as written agreements. You just need a somewhat specific offer, an acceptance, and consideration. That's it.
- 001sky 14y ago
  completely incorrect This comment is "completely incorrect" because its making a jugdment absent any contextually relevant fact.

by apalmer 14y ago

larrys 14y ago

Agree in general but note that it allows the investors who agree to use this framework the ability to put FUD into the minds of founders who deal with investors who don't. Especially with startups with so many newly minted noobies coming on board every day who don't have any history or business knowledge they will soon might accept that this is the way "business has always been done".

karamazov 14y ago

Verbal contracts are fuzzy. They rely on reputation, and an investor's reputation won't take a substantial hit from a "he-said she-said" situation. Having the agreement recorded in writing might not be legally enforceable, but it makes it clear that there was a concrete agreement in the first place.

icegreentea 14y ago

As pointed out elsewhere in the thread, verbal agreements that contain all the other aspects of a valid (for example written) contract is infact every bit as binding as a written version providing you can prove it occurred. You can do this all sorts of ways - witnesses for examples. The wiggle room that enters verbal agreements are typically not the result of it being a verbal agreement, but that verbal agreements are typically more concise than written agreements, and therefore lack the specificity and breathe. In summary, a concept of a legal contract is largely abstracted away from the medium it is expressed it. The medium only effects the ease at which you can prove that your version of the contract is infact the version that both parties agreed to.

apalmer 14y ago
I understand completely verbal contracts are enforceable if all the 'wiggle room' is squeezed out, by specifying in detail the specifics of the contract and witnesses to remove the 'he said she said'. That's all a written contract with all the legalese and signatures in triplicate etc really provides. My point is IF you create a handshake protocol that meets all the criteria to be fully 'enforceable', no one will actually partake, because business people do not enter legally binding contracts without lawyers reviewing etc. The handshake deal in addition to the legal aspect really requires a level of trust. a handshake deal works because both parties trust the other really is making a deal, that both parties are operating in good faith, AND that if their is some technicality does occur they can still back out, but trust exists that neither party will back out unless such a technicality does occur.

eli 14y ago

Raising money relies on trust. If you don't have any faith in the other party holding up their end of the deal, the contract doesn't matter and you should probably reconsider the transaction. In practice, you can get pretty jammed up regardless of what the contract says.

joonix 14y ago

Sorry but this is completely incorrect. Oral agreements are just as valid under the law (except where something called the Statute of Frauds comes into play) as written agreements. You just need a somewhat specific offer, an acceptance, and consideration. That's it.

001sky 14y ago
completely incorrect This comment is "completely incorrect" because its making a jugdment absent any contextually relevant fact.