Hacker News Reader

Comment by Beijinger | Hacker News Reader

"Any contract requires consideration"

I am not a lawyer and I don't understand this phrase. But many legal systems require that a contract is at arm's length.

View on HN

Consideration is generally money (but more generally and dangerously something actually received in exchange for giving away something else in the contract.) It can't be a binding contract if there is no exchange such as merely signing away the code.

https://en.wikipedia.org/wiki/Peppercorn_(law)

If you are assigning me some rights or an entire piece of IP, I must provide you with some consideration (monetary compensation) for that to be a valid contract. You cannot simply “gift” it to me.

So I would, as part of the contract, hand over $1 or $20 to establish that I have skin in the game and have paid for this contract be valid. The consideration could be stock and other things, but it can’t be null.

At arm's length mean, it must be an adequate amount. For example, I can sell a 10 Million dollar home in most jurisdictions to you for 1 USD. While this contract may be valid, it may create tax liabilities because the tax authorities will say this was not a sale, this was a gift.

As a counter example: In many jurisdictions, a work contract that specifically request lots of overtime or forbids working for a competitor in the future would require a significant extra payment and not 1 USD. 1 USD would not be considered at arm's length.

Sure, agreed. That is not the case that is being referred to here, where someone was assigning over IP that they had built while employed by the company but without an explicit agreement about who owns that IP. In this case, $1 or $20 would have been completely fine, as it was consideration for past IP. The work had already been paid for (salary, benefits, etc).

You're confusing domains of law.

* Contract law does not require arm's length. A contract for $1 is okay.

* Tax law may require arms length.

* I've never heard of arm's length in employment law, but there are laws which lead to what you describe (e.g. mandatory overtime pay, minimum wage, etc.). In some jurisdictions, there are limitations on how much an employer can change the terms of employment. If you hire me for $100k, and after I quit my old job a week into the new one, you give a pay cut to $80k and otherwise change the terms of the deal, that might not be okay.

The comment was US-specific. Similar doctrines are found though in Canadian, British, and continental European (though not so much in Scandinavian systems which often do allow totally one-sided contracts in the idea that promises are binding but with other limiting factors).

The idea in systems which have this rule is that contracts are exchanges of promises and there must be an exchange in order to be valid.

Reply on news.ycombinator.com