The Acid Test Clause (2017)
stimmel-law.com
stimmel-law.com
It doesn't work for the musician hired just to have someone playing.
https://www.youtube.com/watch?v=_IxqdAgNJck
I don't blame him at all, it's a safety thing and the M&Ms are one way to see if everything is being done properly
Van Halen got away with it because it's Van Halen.
As a mid-career software person, one of the most important things I've recognized is that my trust for my colleagues hinges on them knowing their limits and knowing when and how to escalate hard problems. I don't want to hear about small problems— those they can solve themselves. But they need to know which problems should become a quick slack message, a whiteboard chat, a revisiting of the design doc, or even questioning the fundamentals of the whole project. A person who slaps on duct tape when they should have engaged a war room discussion is someone who ends up needing almost constant supervision.
Oh man, I'm saving this because this has been my experience working with folks on the business side who seem to always optimize for the second group (the deluded gives a low quote, then the project drags on forever, spiraling out of control because they didn't think through the difficulty).
1) Reject it outright as impossible. (shows unwillingness to consider difficult projects or refusal to let the buyer make the call about what is too much)
2) Assure the buyer you can handle it with no specifics. (shows willingness to overpromise)
3) Give a too-low estimate. (Shows technical incompetence and overoptimism.)
>>If your price had been too high, we would have eliminated you, too. But that’s a different test.
THIS.
And a corollary I have found very useful is to examine any contract presented to you for how the terms are presented. If the terms are even-handed and mutual obligations, then fine.
But I often see heavily one-sided terms, with weasel-out clauses for them, and hard lines and penalties for us. In these cases, my rule is to simply withdraw from the negotiations, or do so after only one failure to try to negotiate fiar and equitable terms.
The lesson learned is that if they are trying to set you up in the contract with your hands tied behind your back, they WILL take advantage of you in any way they can. The one chance to fix it is in case they've just got an attny who 'thinks he's doing his job by being a bulldog' and they aren't paying attention to how it looks; if they fix everything immediately, I'll give them a pass, but it usually goes poorly, which is very revealing. Every time I've broken my rule, I've regretted it.
But if you review it and ask for a bunch of changes, how they respond to the change requests is interesting.
More importantly, this article makes me think about how enforceable the contract is, rather than just the terms.
Yes, which is why I usually give them one chance to respond to fixes (but if there are too many, nope, not gonna leave dozens of adverse mines in there just because it's impractical to fix them all).0
Also, I've seen plenty of very even-handed contracts; I make sure all the ones I write/have written are even-handed and mutual. It is actually the standard practice for honest businessmen and top lawyers — good business builds mutually beneficial long-term relationships, not just short-term exploitative relationships.
And yes, the fact that they hand you an exploitative contract is a huge tell, and how they respond when you try to make an exploitative contract more even and mutual (and put in enforcement teeth that will benefit your side) will tell you all you need to know about not doing business with them.
No deal is worth being tied to an exploitative partner/investor/entity. It will always end up worse than you ever imagine.
I'd argue that may be "common" but the "standard" should be to expect a contract that slightly favors the party that wrote the first draft while still sticking to what's market for the vast majority of the terms
It's standard for contract negotiators to be sleazy people that you don't want to have any contact with. Some times that's not even an indication that your counterpart is dishonest.
But still, that's quite a bad marker. Ignore it at your peril.
In this case the enforcement issue is that the other party can drag out the fight long enough to make the contract worthless.
The "war stories" section from this website are a great read.
I'm not sure what a good solution could be, just that I've seen enough examples of trying to research a potential partner where you get one story from a loose acquaintance and a totally opposite view if you are lucky enough to have a good friend willing to give you the real story.
No legal payout will counteract the lack of future business, and worst case for them they can hire someone to do the work for them on their own payroll.
https://www.bbb.org/us/fl/miami/profile/real-estate/bungalow...
Take a look at Bungalow Living. I had to file a claim against them and won. Their BBB profile is pretty accurate though it could be more so if it were an F.
Any metric will eventually be optimized for at the expense of product ownership.
https://www.stimmel-law.com/en/articles/story-10-buying-peac...
> “Anything can be tested. That’s the nature of reality. There must be a relatively objective method available.” > > Of course he had a point but I was curious to see what he thought would work. “Lie detector test? Perhaps we can torture him to get him to admit his motivations? I’m sure…”
Reading the above genuinely gives me the same vibes I get from reading bad fanfiction. It's hard to put my finger exactly on what is off, but it kept nagging me throughout the article.
"What was going through my head was the real test I was planning to use now. And this test was the important one, the “acid test” and I went to it immediately. “Well, if we cannot use relatively inexpensive methods of enforcement, we can still avoid some of the problem by simply providing that the winning party in any dispute gets attorney fees from the losing party. Simple as that. It stops fights before they begin since both sides only go to court if they are convinced they will win. No insincere fights since if you lose you pay for your opponent’s attorney fees as well.”
I have to say - this whole thing reads like bad fanfiction, takes forever to get to the point, and offers advice that is pretty narrowly applicable. I regret taking the time to read it. Perhaps if I were a lawyer it would be better.
the idea that you can trick developers into doing things they don't understand is offensive. we aren't just cogs, but tell that to some C level terrorist who lays off half his workforce before jetting off to vacation(s). he got a bonus for blaming this quarters failures of the business on the peons who did the work and in 6 months he'll fire the next batch when they fail to achieve his poorly articulated vision. Forbes will do a piece on his visionary technical management prowess.
I have ZERO respect for this grey area negotiation /management behavior. As someone on the spectrum the social challenges of understanding good faith / bad faith make life and business in general almost impossible.
If you cannot trust the people around you life is hard and terrifying. if you have people you are employing that you are not being honest with them: they hate you, and I hate you too.
You assume a person is honest at first, and try to amicably cooperate. Then, if they break the trust, you assume they're simply a snake looking to maximize their personal gain at the expense of others.
The method works best when you can learn the lesson at first for cheap. If you cooperate a few times to get stiffed for a massive amount later, you'd be losing.
This is really what the acid test story is about - the lawyer is trying to find a cheap way to reliably test the VC for good faith
This is also known as the "long con" because you fully gain someone's trust before stripping their life down to the plumbing and leaving.
Talk of legal what-ifs generally make people question if a deal is already going sideways. Negotiation of terms should be a paperwork revision process, and not something dropped on some company rep.
If the key agreement terms are incompatible, just walk away... if people are interested, they may reevaluate the deal terms after the board cools off their egos for awhile.
Best of luck, =)
That's what "professional negotiators" do. Normal people start with a reasonable offer, and are only open to other reasonable revisions.
Arbitration has a lot of problems. The biggest one being bias. Arbitrators tend to favor repeat business. They tend to favor clients, lawyers or classes of clients or lawyers that bring them repeat business. There is nothing dishonest about a businessman or anyone for that matter avoiding binding arbitration.
The entire article is very preachy and simple. Those are two very important subjects and they do not have a simple answer.
If the main concern is that the vc will sue to take over the company, hen the best answer is to make clear provisions in the contract that prevent him from doing that. If you are afraid of not getting your prototype done within six month put one year in the contract. Same thing with government approvals.
Well written clear contract provisions may allow the case to be decided at the demurer stage, before discovery - this is both fast and cheap even in ordinary court.
In a lot of these negotiations you have to use what you know about the actual party to decide what to ask for and how to behave. In this case, they knew that the VC was well known for pushing his technical partner out of the company using a lawsuit when the R&D timeline inevitably slipped, and then taking over the company. When you know that about someone you make it a wedge issue -- are you going to do that to me? And if you say that's not your intention, then why don't you feel secure giving me more protection in the contract?
If it wasn't about lawsuits but about something else like terms or board seats they would've used a different test. But they were negotiating with a person, not an abstract concept, and that's why they went the direction they did.
This is the crux of it for me. If you don’t intend to enforce a clause, you won’t argue about taking it out. If you say you don’t intend to enforce it, but you refuse to take it out, you’re being dishonest and we’re done here.
> It is unusual to begin at the enforcement of contracts end of our discussions, I realize, but it is important for us to know if the document we eventually create is practical from our point of view.”
Very poorly written