YC Open-Source Sales Agreement
blog.ycombinator.com
blog.ycombinator.com
People suggesting that this instead be released on Genius or Github should also remember that there are corner cases in contracts where formatting actually matters. Not only is .DOC the most pragmatic choice for a high-profile template contract, but it's also the safest.
Terrible state of affairs!
http://ethics.calbar.ca.gov/Portals/9/documents/Opinions/CAL...
The best practice is clearly to run the diff from your own last revision, but that may not be available to the attorney. Sometimes clients forward opposing markups of drafts that were prepared without an attorney, perhaps based on a form. Business people may tweak a draft between attorney revisions, as they closed on deal points. It might be worthwhile to go over and attribute each unrecognized change, but not always. Clients may vouch that all changes needing review are in Track Changes. Sometimes speed matters more. Between repeat-player attorneys, or when reputations for ethics and rigor otherwise precede each side, the risk of this kind of thing approaches zero, and everybody saves money.
I have seen things "slipped in", often inadvertently (turned Track Changes off, diffed the wrong files), but sometimes maliciously. I have also done very long days of nothing but verifying execution copies of documents as they were closed out in the run up to big-dollar closings and low-dollar slug-fests. When the transaction is large or important enough, attorneys will handle exchanging drafts across sides and enforce more rigorous change control.
Similar concerns make it difficult to adapt Git for use with opposing parties, since many of Git's features flow from the way it addresses its tamper-evidence design goal. The only notion of a commit with two ancestors in Git is a merge commit, which nonetheless preserves the complete history of both parents. So one side can't manage internal revisions with in-house commits (bearing author name, timing, exact content, etc.) and then issue a PR, while keeping the history of internal revisions secret. They have to edit history and make a squashed commit available for pull. At that point the incremental benefit of Git is just SSH or HTTP instead of e-mail. It's just managed patchfiles.
Squashing works to hide edit history from the opposing side, but it also pulls history out of your own history. You can create a branch at your local head before squashing to save those commits, but when you get an edit back, its new commit will reference your squashed commit. If you rebase onto the branch with your local changes, you can reconstruct "your history", but you'll have to be careful not to push commits from that branch to opposing next round, since it now contains your private edit history again.
Also see my comment below.
If you'd like to chat more about the project, or would like me to walk you through the main ideas or any part of it, please feel free to e-mail me. I'm looking for feedback and dog-fooding the system at present, trying to ferret out flaws in the data model before building out the web interface.
I think the word you're looking for is "convenient" it's easier to just upload the .doc they're using and write a blog post than create a Github repository with a readme, and review pull requests of people correcting spelling / grammar mistakes and such and such.
Props to YC to give this away for free, I read it, looks good, but don't try to excuse them for their laziness by calling it "pragmatism" just because it's YC and we're writing on their forums, great content but they shoulda been more professional before using the words "open source".
This is a LEGAL agreement, that says in the announcement is OPEN SOURCE and doesn't have a license attached to it... Think about it.
While there isn't any clear reason form contracts can't be copyrighted, it isn't at all clear who would hold the copyright or whether it could ever be effectively enforced.
Ken Adams has a nice write-up of associated issues:
http://www.adamsdrafting.com/downloads/Copyright-NYLJ-8.23.0...
Edit: typo
AFAIK by the open-source definition, it is all about the license: http://opensource.org/osd-annotated
Something without a license meeting that definition is not open-source.
In case you're interested, there are actually some legal use cases for WP that make sense. If I'm not mistaken, the Office of the Reporter at the Supreme Court uses WP due to its superior hyphenation, kerning, and other publication-quality print readiness features. The clerks, justices, Reporter, and print staff can all work in the same program from draft to distribution to GPO.
Historically, at least, WP HTML export was also much cleaner, lighter, and more machine-readable than Word's. The Supreme Court of Texas has opinions online, for instance. Last I heard (a couple years ago) that HTML was exported from WP.
nice euphemism. I have a colleague who is a WP fiend -- and has an AOL email address. Not that old either.
First the industry standard for contract negotiation is to determine if you even need a contract like this that has to be "signed" and/or negotiated.
Missing is the dollar amount of a transaction or type of transaction that using an agreement like this relates to. It's overkill for many transactions and will kill deals. Companies don't sue over small amounts of money however deals do get killed if you give customers to much to think about.
Specifically:
"We've just open-sourced a sales agreement any company can use. Though obviously you should use this at your own risk, we've had a lot of experience with what makes good and bad sales agreements."
If you leave it up to the lawyers they are going to try and wrap up every single detail without considering any of the downside risk to having a customer have to review an agreement. Many of these agreements came to being by corner cases of liability that are few and far between.
Bottom line: Make sure to consider if this is necessary in this form at all (for your company) and if there is another easier friction (edit "free") way to provide some protection. This is not a case of "it can't hurt" it can hurt getting a sale.
They can still edit if they really want to, but it leaves the impression your contract isn't intended to be negotiable...
If it's the other side's lawyers who are overlawyering the agreement, why not politely suggest to your counterpart that they, not their lawyers, should be driving the deal?
Because here we're talking about sales, in which asking your counterparty to do things they don't already intend to do injects friction into the process, thus reducing your chance of closing the sale.
1. Formatting: One column of text is better than 2. It's digital, we don't need to cram words in to save paper.
2. Information Architecture. Contracts longer than 2 pages should have a table of contents. In most use cases, people are only looking for 1 or 2 specific terms in the contract. ToC helps.
3. Naming is Hard. Names should suggest some unique aspect of the thing they represent. In this contract, the parties are defined as "Company" and "Client." But both parties are companies. Using "Company" to refer to only one of the two companies invites confusion. Yes, it's defined. Yes, it's standard practice. But a better defined term might be "ASP" or "Host" or "Provider", etc.
4. "Herein." I don't like herein. 4.1 Herein is stuffy. No one talks like that. 4.2 Herein is ambiguous. http://www.adamsdrafting.com/herein/ 4.3 Instead, use "in this agreement" or "in this paragraph."
5. Arbitration? Going to court is a hugely expensive distraction. Arbitration is slightly less expensive and distracting. Any reason not too ask for arbitration?
On the other hand, from a practical point of view, all the nits you pick add up to a certain kind of camouflage over the agreement. If the point is not what the contract says, but that YC said it, now it's "standard", and you can not think about it, then enlightened style is at odds with (facilitated indifference to) substance. For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat.
When I look for a ray of hope, it's the number of blanks. If this thing has to go back and forth, and nobody is going to sign it as presented, then by all means make it as modern as possible. If it's going to be read and handled, it ought to read and handle well.
" For a first sale in particular, the immediate benefit of the fact of a sale probably outweighs probability times cost of any conceivable drafting flaw that doesn't produce uncapped liability, a cloud on IP, or some other existential threat."
I had to parse this sentence about 10 times and still don't entirely get what you're saying
What I tried to convey is that the ability to say you've made a sale is worth a lot. It's a milestone, and it comes in the vulnerable make-or-break days of a company.
A flawed contract provision only hurts when circumstances force you to live by or enforce that provision. The chance of that happening for any provision of any particular contract is usually low. On the other hand, if the flaw in the language can shut your business down, even a small chance of that bad outcome is worth worrying about.
I assume that a very orthodox proposal will draw less attention, prompt less negotiation, and get more deals signed quickly. My conclusion is that, because the first sale is worth so much when you need it, you might be better off with a traditional, error-prone form that's easier to get signed than a modern, technically superior form that protects you in edge cases and after long negotiations. Your business might fail because you never sold, long before anyone has any reason to sue you.
In my defense, I don't choose to express myself personally in the style of my contracts. You'd probably have understood me better if I did, but no one should have to live that way.
I see a lot of comments around Word being not the right format for "distributing, sharing, commenting".
My startup Documize [1] is just a week old and is currently being tried out by a handful of legal professionals and the like for handling what happens around structured documents.
The premise is that MS Word is where structured documents are born in the enterprise world. It's what happens after they come into being that is the problem: network drives, file sync folders, email tennis, Word-track-changes, manual consolidation, etc.
A real pain.
Documize aims to help people distribute documents, collate feedback, provide version control and even allow for private notes. From a browser.
Working towards that vision at the moment -- just thought I'd throw this out there.
Also, many thanks for not including an arbitration clause and class action waiver as a default term. Not only is it incredibly sleazy (in my opinion) but also many companies will have significant push-back on such a term. Usually requires their own in-house counsel to look at it, and that's the last thing you want.
We'll probably also attach an explicit license as well. We've similarly described the Series AA and Safe as open sourced documents and honestly didn't really think too much about it after that. Mostly, it's to efficiently tell you that the documents are free to use and change as you see fit.
Obviously, we're not trying to trick anyone. Suing founders is not part of our business model.
My disappointment is when people are diluting this term, because it doesn't mean just free as in beer and it doesn't mean just having access to the source code. It's much more than that and the definition couldn't be clearer. Many companies have tried capitalizing on this term without delivering and this has left a sour taste amongst many of us. And YCombinator amongst all organizations should be aware of this, let alone the lawyer that drafted this document.
But anyway, thanks for sharing.
What's the best platform for that? It can't be Word comments...
They already did a annotated SAFE: https://casetext.com/contract/simple-agreement-for-future-eq...
The annotations just for California law would be 10x the size of the document.
For lawyers interested in what a masterfully annotated computer program looks like, have a look at Donald Knuth's "literate programs". If you've a uni library nearby, have a peek at his Computers & Typesetting. It's gorgeous stuff. Great pictures, too!
This is incredible for YC to do. We spent almost $3000 getting our first draft contract. Lawyers are expensive. :(
I'm incredibly glad we have him on our side, and I would recommend him to anyone - startup or otherwise.
I just wish, sometimes, that he weren't $500/hr. :)
Re: the lawsuit, for this type of contract you're right that it's pretty safe to say there isn't much to be negligent about, especially as they're a reputable firm. The fact that YC's docs were almost word-for-word our docs makes me much more comfortable too. Granted, we had it 3.5 years ago, and YC's docs came out today, so not like we had any other choice. :)
This is a contract, without any of the "this is why you should use this awesome sauce", which I generally like to include before going into the nitty gritty, but just for fun, I created a sample proposal in my app (Mimiran Online Proposals) from the doc, incorporating @teachingaway's feedback that 1 column with decent sized text is more readable, especially online (you can always generate the PDF version).
http://www.mimiran.com/sample-proposal/ycombinator-sales-agr...
Only caveat: I've sold SaaS to large enterprises (like AT&T, Coke, etc.) for ten years, and unfortunately most of them insisted that we use THEIR template, which was a huge pain point for us.
When you dress for an occasion, you start by picking items out of your closet. If you don't have what you need, you may go to the store and buy off the rack. If the occasion or your needs are very special, you may have ready-made items tailored, or may even have something made for you. Good lawyers work similarly.
Secondly: 4 columns of approx 25 characters - that has to be the most annoying layout ever applied to any legal document.
Thirdly: The document could be significantly improved. If enough people are interested in a markup + comments from a customer and vendor perspective based on 15+ years experience drafting, reviewing and negotiating docs like this, I am happy to provide such within a few days. Please indicate your interest below.
1. The formatting should be 2 columns per page of ~50 characters, not 4. Do you see something different than this? http://screencast.com/t/SnkQDCeO
2. We'd welcome comments + markup to make it better -- drop me an email (tyler at clever dot com) if you're up for it.
I'm not sure if its an Open source fail or MS up to their usual tricks again.
I'd be surprised if many larger enterprises agreed to 30 day payment terms and a late payment penalty clause - particularly one with interest compounding monthly - since they regularly take more than 30 days to pay invoices (the standard hack is to offer a reduction for payment within a certain time frame instead)
If I were the customer I'd also be extremely reticent about signing a contract which gives the vendor the right to increase the renewal rate thirty days ahead and also obliges me to automatically renew for the next period if I don't give thirty days notice. That could be an expensive decision to make in the space of an afternoon...
Businesses do annual budgets. Try to push a 30-day notice of price changes at my employer, and we would kick you out or get painful concessions immediately. Ditto with auto-renewal.
These are consumer gym membership-like terms, I'm really surprised anyone gets good results with this doc as it stands.
Bigger customers will absolutely look for 99.9%, and anything less will be a huge red flag during procurement.