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The Handshake Deal Protocol

ycombinator.com

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Re: The Handshake Deal Protocol

#221

Post by mtrimpe »

jnsaff2 wrote: post #219
mtrimpe wrote: post #170

Earlier quoted context omitted.

I keep wishing someone takes up the frighteningly ambitious idea here: developing a low-friction government approved (through e.g. legal precedent) service for signing data. After a passport/identiy check it would technically just be a highly available service to cryptographically sign blobs, coupled with a mechanism to handle retractions of signed data in case of compromised keys and a decently advanced notification…

There you go: http://www.guardtime.com/

I think you missed my point. It'd be quite hard to build e.g. third-pary petition site on GaurdTime.

The other comment's DocuSign suggestion comes closer, but I also doubt DocuSign offers support for third parties to do micro-signing through an API.

Re: The Handshake Deal Protocol

#223

Post by rlpb »

argonaut wrote: post #57
rlpb wrote: post #10

A handshake is generally not taken to be a legally binding contract in itself. An email might be. So it might be worth making it clear in the emails that you don't intend them to be legally binding.

Oral contracts are legally binding. http://en.wikipedia.org/wiki/Oral_contract

http://en.wikipedia.org/wiki/Intention_to_be_legally_bound

Re: The Handshake Deal Protocol

#224

Post by rlpb »

Dylan16807 wrote: post #48
rlpb wrote: post #10

A handshake is generally not taken to be a legally binding contract in itself. An email might be. So it might be worth making it clear in the emails that you don't intend them to be legally binding.

A handshake sure sounds like a gesture used to signify that a deal has been negotiated to the satisfaction of both parties. Why would it not be a contract?

You might argue later that the clear intention was to not form a legally binding contract; that you were merely accepting the general terms, for the specifics to be agreed on later, and still had the option to refuse to go ahead at that point.

On the other hand, you might argue later that you did intend it to be legally binding.

Both arguments would be valid and your intent and what a reasonable man would assume would have to be decided on later by a court.

pg's article reads to me as if the intention is for it to not be legally binding, when he says "The actual transaction comes later, when documents are signed and money changes hands."

The existence of this article might change the view of the courts.

So to avoid doubt later, you should make it absolutely clear what you intend. You can form a contract with a handshake if you intend to, as it has been pointed out. But only if you intended it. So why not save yourself some future legal expenses by making it clear what you both intend?

http://en.wikipedia.org/wiki/Intention_to_be_legally_bound

Re: The Handshake Deal Protocol

#225

Post by mtrimpe »

davidmr wrote: post #207
mtrimpe wrote: post #170

Earlier quoted context omitted.

I keep wishing someone takes up the frighteningly ambitious idea here: developing a low-friction government approved (through e.g. legal precedent) service for signing data. After a passport/identiy check it would technically just be a highly available service to cryptographically sign blobs, coupled with a mechanism to handle retractions of signed data in case of compromised keys and a decently advanced notification…

I just bought a house and never signed one piece of paper in the process (up to the closing, of course. Then I signed several hundred pieces of paper.) All of the contractual agreements until then were signed digitally through DocuSign and they even have a nifty little iphone app. Of course they were all contracts written by my lawyers, but that counts as data. The concept of a written signature is far less relevant…

Okay, so DocuSign seems to be quite close. For my idea you'd have to imagine DocuSign with:

- an OAuth(-like) API for other sites, e.g. Reddit, to sign micro-data on your behalf.

- the ability to retract signatures after time X and notify subscribers of that data of it.

- [optionally] a fraud detection algorithm to give advance warning of possible malicious usage (app compromised or your app password.)

- the ability to request confirmation of a signature before time X for cases where retraction after that moment is unaccaptable.

That would make it possible for webapps to have every interaction with it be provably performed by the user, turning it into a legally valid audit trail.

Re: The Handshake Deal Protocol

#226

Post by Jplenbrook »

wbl wrote: post #120
pg wrote: post #36

Earlier quoted context omitted.

It happens. There are investors who are notorious for offering lower caps to startups that have already started raising money. The solution is essentially to route around them. We advise startups to approach such investors last, when they've already raised enough that they feel comfortable saying "take it or leave it." (There was a big kerfuffle a while ago when an email of this type got leaked.) There's another case…

This seems very inefficient for the startup. They have people willing to offer more money for less shares, so why not go down the list until they have enough money? Or are there second-order effects I am not seeing here.

It may not necessarily be inefficient. YC has an established brand. Initial YC investors know they will get the best possible terms, so they would be wise to offer the max value. The start-up it could take this "max" valuation to all future investors.

The alternative would be a low initial offer which would essentially keep anyone else from paying more. In essence the YC start-ups are giving the initial investor a money back guarantee on the difference between their offer and the lowest offer.

Re: The Handshake Deal Protocol

#227

Post by preinheimer »

ghshephard wrote: post #190
preinheimer wrote: post #158

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.

If this is a handshake deal - then doesn't the investor reply yes immediately? It would be nice if those who are more knowledgeable than I would weigh in and indicate whether these things happen in real-time. I.E. The "Handshake" deal takes place within the space of a few minutes. g.

The conversation seems to happen in real time, then flips over to email for a written record. Without a defined expiry it's not clear what happens if the investor says "yes" two months later after the startup receives some fantastic press.

Re: The Handshake Deal Protocol

#228

Post by michaelt »

tomp wrote: post #150
swampthing wrote: post #137

Earlier quoted context omitted.

Taken literally - yea. But you can fix it pretty easily just by adding the standard "this is nonbinding" language that all term sheets have. That's a little inelegant though. Probably what would be best is just to have a page defining the protocol (and clarifying that it is nonbinding) and have people link to it in their handshake email.

What's the point in making a non-binding agreement? Isn't it easier to just not make one?

Same reason you might get engaged prior to getting married?

Re: The Handshake Deal Protocol

#229

Post by mjn »

jarrett wrote: post #110
tc wrote: post #65

This protocol causes a valid and enforceable contract to be formed. In fact, the constraints imposed by the protocol are almost exactly what you might learn about contracts in the first year of law school. A contract is composed of a 1) reasonably specific offer, 2) acceptance of that offer, and 3) some consideration between the parties. By forbidding vague offers, PG is assuring that obviously questionable or unenfo…

There is much to be decided about any investment deal beyond what is contemplated in the protocol. For some examples: http://mashable.com/2011/05/27/term-sheet-startup-investing/ Just as a thought experiment, let's imagine what would happen if you tried to enforce this handshake deal (complete with email confirmation per steps 3 and 4). How would the courts decide all the issues that would normally have been negotiat…

Courts have some leeway in what remedies to use, precisely for some of those pragmatic reasons. One remedy for a contract breach is for a court to issue an injunction ordering performance of the contract. As you note there are some practical problems with a court ordering VCs to invest on the basis of this kind of agreement. But another remedy is for the court to just award monetary damages (how to calculate damages for nonperformance of a contract is a whole other can of worms, but it's something courts do).

Re: The Handshake Deal Protocol

#230

Post by pja »

Karunamon wrote: post #211
brohee wrote: post #163

Earlier quoted context omitted.

Don't forget to do it before witnesses, preferably a Secret Service agent. "-STATUTE- Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other e…

Important text: with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued No destroying money for the express purpose of destroying money.

So the K Foundation stunt (burning £1million in cash) would have been illegal in the US?
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