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The Handshake Deal Protocol

ycombinator.com

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Re: The Handshake Deal Protocol

#151

Post by OnyeaboAduba »

3pt14159 wrote: post #119

The idea here is good, but the execution leaves far too much room for the startup founder or the investor to get screwed. In contract law any ambiguities are judged against the person that wrote the contract. Since the startup founder wrote "This is to confirm you're in for $100k at a $5 million cap." This is the contract that they have offered. Why bother making things so formal and binding when everyone knows that…

Im confused what other things are there to consider if you say your in for a certain amount you should have no problem having that put in writing right?

Re: The Handshake Deal Protocol

#152

Post by JosephRedfern »

msellout wrote: post #105
notatoad wrote: post #50

Totally unrelated to the topic at hand, but what is PG's obsession with tiny fonts? this article is set in 8.5pt font - can anybody read that? at 10pt HN itself is almost as bad.

You don't use your browser's zoom feature?

Should you really have to?

Re: The Handshake Deal Protocol

#153

Post by legutierr »

jcampbell1 wrote: post #90
legutierr wrote: post #40

Earlier quoted context omitted.

But might that not be a problem? Some deals must get hung up on the documentation, no? Or perhaps more reasonably, a disagreement over the materiality of something discovered in due-diligence? This can't be a promise to invest X at Y valuation no matter what, which it might be if it were treated as a legal contract.

> This can't be a promise to invest X at Y valuation no matter what, which it might be if it were treated as a legal contract. Legal contracts don't work they way you think. If there is a discrepancy between what is offered and reality, the contract can fail, or the courts can find a reasonable interpretation, or both parties can agree to change the contract (most common). This happens in due diligence all the time.

Thanks for your response. Can you help me understand what would happen under this protocol were an investor to pull out because of something that is discovered in due diligence? Or if the proposed modification were not to be acceptable to the company seeking investment? I would imagine in that case that any dispute would be over whether the discrepancy was material enough to justify the modification or withdrawal.

Either way, though, there is a clear difference between this and a verbal agreement in that if the parties cannot reach a reasonable compromise, a dispute around a verbal agreement will most likely (although not always) be dropped, and an email exchange such as this would provide a greater opportunity to litigate.

From my point of view, one primary rational of having a written contract is to reduce the likelihood of litigation. With that in mind, a verbal agreement seems perhaps a better option than an email-based protocol, in a weird sort of way.

Re: The Handshake Deal Protocol

#155

Post by 001sky »

The startup sends the investor an email or text message saying "This is to confirm you're in for ." The investor replies yes.

== This not a handshake deal, de-facto or de jure.

Therefore, this is a terrible, misleading article. A/k/a why god invented lawyers.

[0] The Handshake Deal Protocol (ycombinator.com).

Re: The Handshake Deal Protocol

#156

Post by 001sky »

driverdan wrote: post #112
argonaut wrote: post #76

Earlier quoted context omitted.

Thanks you. A lot of people commenting on this thread don't seem to realize that oral contracts are just as legally valid as written contracts (as long as all the elements of a contact are present), email records notwithstanding.

Not necessarily. In New York state for example, it's required that any contract worth $500 or more be written. Oral contracts over $500 aren't enforceable.

Right. And under CA law...

Re: The Handshake Deal Protocol

#157

Post by sirclueless »

FlukeATX wrote: post #141
joshAg wrote: post #108

Earlier quoted context omitted.

that's what steps 3 and 4 are for, aren't they? Wouldn't that make it a written contract instead of just an oral one?

As someone who hasn't been past first year of law school, I can't say whether an SMS creates a valid written contract.

Emails definitely do (though IANAL).

Re: The Handshake Deal Protocol

#158

Post by preinheimer »

Step 4 needs to be:

The investor replies with Yes within 96 hours.

Otherwise it's the equivalent of having one party execute a contract, and the other party just sit on the contract to wait for more information. Either executing if it's clearly beneficial, or ignoring if it's not.

Re: The Handshake Deal Protocol

#159

Post by 001sky »

joonix wrote: post #109
apalmer wrote: post #71

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…

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.

completely incorrect

This comment is "completely incorrect" because its making a jugdment absent any contextually relevant fact.

Re: The Handshake Deal Protocol

#160

Post by comrade_ogilvy »

jarrett wrote: post #101
FlukeATX wrote: post #99

Earlier quoted context omitted.

Though this does follow the qualities of a contract, it's important to note that oral agreements only get you so far in many jurisdictions and particularly have an upper limit on the value, around the order of $500. So while its great this is an explicit and clear conversation, I don't think you can say that it is assuring unenforceable agreements aren't made.

There is a written component to the protocol: The follow up email/text. "This is to confirm you're in for X." "Yes."

I do wonder what happens without step 4 occurring.
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