It wont hold up in court

Posted by Pelle March 26th, 2008 5 comments edit

Rafe Needleman wrote a review of Agree2 today: Agree2 creates binding legal documents that won’t hold up in court

I am proud of his comments about the technical aspects of the site, however the title about the legal documents that not hold up in court I find problematic. That said, I am really glad Rafe brought this up. There are plenty of myths and misunderstandings about this.

Technically, I have no beef with the service. I think it’s pretty cool, actually. But although I’m not a lawyer and even though I hate trying to decipher legal agreements when I need to, the service’s tacit encouragement to create my own non-lawyer-approved agreements scares the bejeezus out of me. Sure, I could write an agreement between me and someone I’m hiring to re-wire my house. And if the contractor I’m working with were new, he or she might even sign it. But it would still, probably, be a crappy agreement. A court might agree that the electronic edits and signatures were binding, but that doesn’t mean the agreement would be legally sound. Certainly it wouldn’t be complete.

I object to the title

Saying that Agree2 agreements don’t hold up in court is like saying agreements written in Microsoft Word, don’t hold up in court.

Agree2 is a media and a framework for you to write agreements. We take care of all phases of the contract from drafting, versioning, inviting and legal binding acceptance from the parties. We provide evidence as Rafe points out in a very easy to use manner and allow you to come back and find your contracts in the same place 2 years later.

We hope to foster a community of people to share contract templates. People have already been doing this for many years, informally emailing word documents around.

Due to California law, we can not take an active part in analyzing the contract text. However we try to provide as many tools as possible for this to be easy for you and your advisors to do.

The OAuth standards group recently used Agree2 to create their OAuth Non-Assertion Covenant and Author’s Contribution License. This has been signed by amongst others Digg, Twitter, Google and AOL. I am sure Google’s legal department would not allow them to use Agree2, if they found a problem with it.

Contracts are not between your lawyers, they are between the parties

A common misunderstanding about contracts is that they have to be scary legal documents written by lawyers.

First of all a contract is not the document itself. It is the concept of an agreement the two parties have. The written contract is a handy document that writes down the terms of the agreement in such a way that there aren’t misunderstandings of each parties duties.

We perform contracts everyday. Many of them through our actions like ordering a meal in a restaurant others written like signing a credit card slip or accepting a user agreement.

Generally speaking it is a good idea to write contracts into a document to avoid disputes in the future. This is the whole reason behind writing a contract down. Avoiding disputes. If a dispute should happen in the future this document is used by a dispute resolution institution such as arbitrators or courts.

Opaque legalese is all about fear and power

When I have had to sign long contracts in the past, I can be pretty certain that the person giving me the contract doesn’t understand it one bit. They expect that I don’t understand it either. These contracts still serve their purpose, by keeping us both too frightened to cause a dispute.

That said disputes still happen, and they happen mostly because there is some disagreement between the parties about what The Party of the First Part or some such legalese foolishness actually means. (See more)

Courts are used to standard legalese terms, that is true. There are complex hidden meanings between these. However they are also perfectly able to understand plain English. More importantly if you write your contract in Plain English yourself you are probably less likely to end up in court in the first place, because you and the other party both understand your duties under the contract.

Lawyers are needed for many things

There are definitely cases where you want to bring in lawyers. I think it’s definitely a good idea for large complex contracts. Please do NOT write up a term sheet for a large investment yourself. However in most cases it is a good idea to write the meat of the contract yourself and then have a lawyer go over it. You can then use this a private (or public) template within Agree2 and have the best of both worlds.

However it doesn’t make any sense whatsoever to have pay $400ph for a lawyer to go over a contract worth $500 to you. If you are doing this repeatedly have him go over your template.

Many contracts that should be documented end up being agreed over a phone or in a brief email instead to avoid the hassle of form documents and lawyers. Agree2 gives you a much better option than either.

We are planning a feature in the future where you can give lawyers access to review your contracts and templates.

Government requirements

Most contracts can and should be simple. There are however a few types of contracts where complexity is mandated by law. In particular apartment leases and employment contracts, where just about every state/country have specific legal requirements.

More reading

I have written extensively on this before Contracts are relationships with strings attached, Pragmatic Contract Law for entrepreneurs and Understanding and Preparing for Jurisdictions

Wikipedia on Contracts is also a great resource. Finally talk to your lawyer. Also remember that I am not a lawyer myself.

Posted March 26th, 2008 under:
Comments
rafe@cnet.com
Rafe Needleman March 26th, 2008 destroy

I like your argument (even if I don’t agree). I’m linking to this post from the story I wrote.

dknet@ccg-group.com
Dennis Kelley March 26th, 2008 destroy

I have tried several times without success to post a reply to Mr. Needleman’s article at the Webware site. I guess they really don’t want comments. And I still don’t understand what it is he doesn’t agree with. I think he’s way off base. Anyway, I’ll post my reply here…
====
Mr. Needleman, I think that you have done Agree2 a grave disservice by impugning the legality of agreements that may be developed on their site. Although not an attorney, I have spent over 25 years involved with, and developing, contract documents for consulting, construction, and real estate purchasing and leasing. I can safely say that some of the crappiest documents I’ve had to work with were developed by attorneys. Not because they were incompetent, but because they were developing agreements in a field or for a project that they did not understand, or because their time and budget constraints prohibited them from spending an adequate amount of effort in the development and review of those documents.

Often the best contract documents are developed by the legal layperson who has to work with those documents on a regular basis. They are the ones that understand what can go wrong in a transaction, and where misunderstandings among parties occur.

This is not to say that in complex transactions, a contract cannot benefit from the eagle eye of a competent attorney, but in many cases we are dealing with fairly standard boilerplate legalese that has been time-tested in the business arena. I, like thousands of others, have been subject to the headache of criss-crossing Word documents emailed among a variety of parties. The opportunity for critical clauses and language changes to get dropped from these documents is immense. A collaborative service such as that offered by Agree2 could be very valuable as an alternative to the ‘Word games’. And when used between sophisticated parties to develop complex documents, there is often no need to engage with attorneys in that development process.

Furthermore, when we’re talking about simpler agreements between two parties, having both parties collaborate in the development of the document will often lead to a better understanding of the scope of services involved,

Therefore, I can see where Agree2 offers a very valuable service. For you to impugn the service with a broad-brush statement that the documents developed would not hold up in court is not only inaccurate to the extreme, but an irresponsible representation of their product.

I have been reading your articles among various PC magazines and web sites for years, and have always felt you offered valuable insight into a variety of tech products and topics. But in this case I fear you have strayed out of your field of expertise.

You owe Agree2 an apology!

ab006@chebucto.ns.ca
Ben Tremblay March 28th, 2008 destroy

Greets!

-bentrem from Twitter here.

I came across an interesting document this week: “<a href=”http://www.procon.org/legal.htm">Making Firms Do It Your Way</a> ," a common sense contract between a client and his lawyer"

nice tuh meetcha!

ben

econotrix@will-k.com
Will Kamishlian April 2nd, 2008 destroy

Pelle, you are spot on. I think this is among your most concise and compelling arguments for Agree2. Dennis Kelley is right. Mr. Needleman does owe you an apology, or at least a response here.

Mr. Needleman completely misses the notion that “application” is critical to Agree2. Application is critical for choice of any tool. There is a time to bring in lawyers; however, as you point out, why subject yourself to the economic drag of hiring a lawyer when a lawyer is not required? Why should all minor contracts suffer that economic drag?

Put simply, the potential cost risk of breach does not justify the cost of a lawyer for small value contracts. Generally, the contractee assumes risk of breach for such contracts, and this is why US homeowners desperately seek reputable building contractors.

His example of hiring an electrician is especially specious. When we hire home improvement contractors, we often have no contract beyond a written estimate, which itself is often non-binding. Thus, the electrician’s estimate may well be less binding than the contract implied, using Pelle’s example, when ordering a meal. When I order a meal, I have an exact specified price, and I have some idea of when that meal will be delivered. This is often not true when hiring a contractor, such as an electrician.

Note that in both cases, it is not the contract that provides physical safety for the purchaser. Health boards oversee restaurants, and building codes protect consumers from shoddy electrical work.

Why do we fail to execute binding contracts with home improvement contractors? This is the case because people will not spend an extra $200 to create a binding contract with an electrician, nor would an electrician agree to a contract full of legalese, whether or not both parties would benefit from a more specific contract.

In my opinion, this brings us to one of the greatest benefits of Agree2—continuously improving contracts publicly posted. If my neighbor executes a simple yet good contract with an electrician, I do not benefit. If he or she uses Agree2 and makes that contract public, I can use it myself, and I can improve upon it if possible. I can benefit from the combined experience of users who have made their contracts public.

rafe@cnet.com
Rafe Needleman April 2nd, 2008 destroy

I think we are writing here from our own experiences. Mine is that lawyers help in ways that we can’t always predict.

As much as I have hated the expense and the pretense of lawyering up, when I have needed to enter business and real estate contracts, in more than one case I learned after the fact that some obscure clause that the lawyer put in the contract became very valuable to me down the line.

I agree completely that legalese is almost always more opaque and expensive than it needs to be. But I take issue with people who say that it’s all BS for the sake of BS.

I said it in my review and I still believe it: The Agree2 technology and platform are very strong and very useful. I’ll concede the point that lawyers are not needed in every single little contract we execute in our lives. But my threshold for lawyering up is perhaps lower than the other commenters here. Again, that’s based on my life experience.

PS: If there’s a problem in the Webware commenting system I’d like to know more (so I can get the cursed thing fixed). My email is [email protected] Thanks.