How an informal IM exchange cost one business a million dollars | Hacker News Reader

How an informal IM exchange cost one business a million dollars

blog.ericgoldman.org

75 pointsgrellas35 comments

Judging from the article alone, this seems like a triumph for common sense. When a guy with the title of Vice President promises you money, in writing, you should be able to rely on that promise.

The defendants tried a variety of lame excuses for why they should not be held to their promises, and the court preferred the common sense interpretation of the conversation.

Bravo!

awesome!

Downvoters who didn't get the memo, this is an apropos quotation from the article. The million dollars actually turned on this phrase.

But it adds nothing to the conversation here.

An argument could be made that IM, while written in form, is actually oral communication due to its characteristics. In fact, many linguicist consider IM and texts as verbal communication.

> many linguicist consider IM and texts as verbal communication

All linguists consider IM and texts as verbal communication{1}. The same for books, magazines, and websites: the word "verbal" generally just means "using words." Non-verbal would mean communicating without using words--such as pointing your finger, taking an item from the shelf, or giving a suggestive look.

You really mean "oral" versus "written."

It's not just pedantry; in cases like this the difference between "verbal" and "oral" is part of what is at stake. And for any startup, it's important to understand the legal language in agreements you make. The term "verbal agreement" has become so abused by the media, but it still makes a difference among lawyers (who might one day control the fate of that contract you signed).

{1} A smiley-face in a text or IM is borderline, but I assume you mean something like "NO LIMIT!" from OP.

One of the accepted meanings of "verbal" is "spoken, rather than written" [1].

[1] http://www.merriam-webster.com/dictionary/verbal

Actually in some countries an oral agreement is as binding as a written.

Actually, if someone promises you a million dollars verbally, then in common law you can rely on that promise (subject to many caveats and details, IANAL etc). In fact you might be able to rely on it in several ways -- contract law, estoppel law etc.

To avoid he-said/she-said, many business contracts include a written "no-verbals clause", saying in essence that the contract can't be amended except in writing.

This is necessary because contractual relationships do not need to be written. The elements which the law pattern matches to say "this is a contract" do not require "must be written down somewhere" (though again, there are exceptions - for example many jurisdictions have legislation requiring property contracts to be in writing). For example, when you buy a stick of gum, you have negotiated, agreed to and executed a contract with an agent of the seller (the clerk). Contracts are largely invisible in every day life, but they exist. The decision to write them down is a risk-management exercise, where contract parties realise that the cost of settling disputes about verbal disputes is higher than the cost of signing a written contract.

In this case the common sense has been to rule that an IM message was "writing", thus it was not treated by the no-verbals clause, thus it successfully amended the original contract.

Now currently these modification clauses are blacklisting based. You name what you won't count as modifying the contract. If it hasn't happened already, a smart lawyer will look for a whitelisting approach, where you list what will count in future. So instead of "no verbal, no IM, no twitter, no currently-unforeseen-service-X", you'll get "on paper only".

Again, I am not a lawyer, this is not legal advice etc etc.

Since some will wonder, an e-cigarette is "an electrical device that attempts to simulate the act of tobacco smoking by producing an inhaled mist bearing the physical sensation, appearance, and often the flavor and nicotine content of inhaled tobacco smoke." http://en.wikipedia.org/wiki/Electronic_cigarette

So, it's a physical object that makes you feel like you're smoking a real cigarette. I was picturing some kind of software. :)

I recently ran into these, they were being sold at a Japanese photo shop out of all places. Reading more about it online later I found that you insert pouches apparently containing nicotine and the USB-powered device then vaporizes it.

One of my colleagues recently bought one of these and has been puffing away at his desk and in meetings. He paid $200 for his but I've seen them for about $10 on Dealextreme. The article talks about a $45 referral fee so I guess the markup is quite high. Interesting side note is that his "cigarette" is USB rechargeable.

I do find it slightly troubling that a single utterance of "NO LIMIT" is enough to alter a contract.

"NO LIMIT" is not very explicit in what it refers to.

A contract signed and in place was able to be refined without additional signatures nullifying the previous contract -- This is a scary precedent. May there be mercy on anyone that IMs me something that could be perceived as altering a contract we have.

As the article notes, the court considered whether there could be any other feasible explanation for the "NO LIMIT" response - and Smoking Everywhere failed to provide one.

An agreement to modify a contract is subject to the same requirements as the formation of an initial contract - it requires a "meeting of minds" (the trite legal phrase for it).

So to avoid taking on unwanted contractual obligations from your hypothetical IMer, don't say "SURE, DEAL" in a situation where it might reasonably be considered a commercial agreement :).

I understand that the court offered to allow an explanation for the "NO LIMIT" response, but that is not where I was going with the lack of explicitness with the "NO LIMIT" response.

What is troubling about it is that contracts can be altered (by an IM conversation no less) from extremely explicit verbiage to less explicit verbiage.

But be careful to note that I am not so much concerned about the particular case in question, but rather the precedent it sets.

More regarding this case - I am shocked a single person has the ability to completely nullify a previous contract stipulation and provide a new one without so much as a signature.

I agree, it seems strange that the clause in the contract, which before must have been something along the lines of "$45.00 per referral, to a daily maximum of $XX or 200 referrals..." has been changed to simply "NO LIMIT." Add to that the fact of how vague "NO LIMIT" as a statement is (perhaps he meant "NO, LIMIT"?) and the dubious authenticity of the actual purchases, and it seems strange to me that this was decided in favor of the affiliate.

The VP could have responded to "awesome!" with "I think you didn't understand me if you think that's awesome. I meant, 'NO, THERE IS A LIMIT.'"

But he didn't.

There are several factors that led to this, primarily:

1) written modifications (with signatures) were allowed 2) under Delaware law, conduct or statements could modify a written contract with a signed writing clause

Clearly in this case statements could not modify this contract (as it was explicitly prohibited). However the court ruled that the IM conversation was not a statement but writing.

The court also decided that since Delaware law allows statements to modify a contract (even one that requires signatures), this also applies to written modifications.

While I agree that it's shocking that a contract can be modified so easily without a signature, that's a law that is already on the books. The only precedent that has been set (as far as I can see, IANAL) is that IMs are writing.

How did the court verify the authenticity of the IMs?

It seems like no-one disputed their authenticity, so they probably would not bother verifying them.

The same way they verify anything else: one side says "These are IMs", the other side declines to say "No, they aren't" (wisely).

This is where I was leading with my original question. If the IMs are contested, what happens then? Do we go to the ISP? What if the session is encrypted? Do we go to the IM service provider? Ultimately, the burden of proof should be on CX to actually prove those are the IMs, right? Would CX have the ability to request logs from a provider anyway, since this is a civil case?

I think it's important to know the answers to these questions because anyone can show up in court one day claiming to have incriminating IM chats for XYZ - so the question is how to prove it's false, or what happens if they are false.

That's certainly one way to do it. The Federal Rules of Evidence is pretty flexible on ways to authenticate different documents. If you look at Rule 901, a party who offers the document as genuine can authenticate it by witness testimony, expert testimony, process (the document could only be obtained via a specific process), etc.

See: http://www.law.cornell.edu/rules/fre/rules.htm (search for 901).

Bad things happen to people who fake documents or falsely claim real documents are fake. Your lawyer will be disbarred if he knows or suspects and doesn't report you. I don't think it happens because people would rather lose their company's money, even a lot of it, before they want to go to jail.

Smoking Everywhere doesn't seem to have contested the authenticity of the IMs.

So basically one affiliate was generating sales of $50000 / day for these. Impressive.

Some affiliates are phenomenal marketers. Frank Kern claims to have made 23.8 Million dollars with one of his product launches. In 24 hours.

What impressed me was that this $50k/day was from a court document, so I assume it to be true. With affiliates it's often difficult to know, since they have an incentive to project success to boost e-book sales.

>With affiliates it's often difficult to know, since they have an incentive to project success to boost e-book sales.

If you're a successful affiliate I find it hard to imagine that you'd want to write an e-book and even harder to imagine that you want to have more people competing with you for affiliate money. So presumably the intention is to go pyramid and get referral fees for those you subscribe in?

More money in selling dreams than products

Why was Smoking Everywhere upset? They got around 1244*30 + 670 sales. Based on their agreement of $45 per sale, that's about 1.7 million.

Isn't that what they want? Lots of sales?

That's how much they had to pay out to the affiliate network operator, in return for successfully completed registration forms for a free trial Smoking Everywhere was running. It's most likely that they had a limited amount of resources to dedicate to the campaign.

So why did they keep taking orders? Shut down their website if they don't want orders. Or don't make a deal for $45 in the first place.

From reading the article it sounds like SE decided they did not want to pay for services rendered then tried to hide behind an obviously modified contract to limit cash outflow 20 < 200 referrals per day.

So I think the headline of this post is a little misleading.

Its is widely accepted that affiliate marketers can borderline on sleazy but my experience with e-cigarette dealers makes them look like saints in comparison.

Of course, the solution is not to put stuff like that into the contract.

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