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The thing that actually scared me the most was this:

> Release of Unknown Claims. I acknowledge that there is a possibility that after my execution of this Agreement, I may discover facts or incur or suffer claims which were unknown or unsuspected at the time this Agreement was executed and which, if known by me at that time, may have materially affected my decision to execute this Agreement.

...

> I have been advised of the existence of Section 1542 of the California Civil Code which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE

...

> I and the Releasing Parties knowingly and voluntarily waive the provisions of Section 1542, as well as any other statute, law or rule of similar effect, and acknowledge and agree that this waiver is an essential and material term of this Agreement...

What the actual fuck. Can a contract lawyer chime in on whether this term is enforceable? Can a release release the very laws that regulate releases? In California?

IMHO lawsuits are like an exception handler--they're what you do when the normal way of doing business fails. There are people who use exceptions as part of handling normal conditions and there are people who use lawsuits as a normative way of doing business, and I try very hard to work with neither with about the same level of distaste. Documents like this make it pretty clear what side of the line they're on, as this clause only comes about with an army of lawyers with nothing better to do.




The part that should scare you the most is the arbitration clause. NEVER sign a contract with an arbitration clause, ESPECIALLY if you are an individual and the counterparty is a large corporation. Arbitrators are corporate puppets, and an arbitration clause is essentially a license to screw you in whatever way they want. I learned this lesson first hand the hard way.


Dispute of the "applicability of this arbitration provision" is itself subject to resolution by arbitration according to that clause. Struggling to get my head around that one.


A word in favor of arbitration clauses.

The big advantage of an arbitration clause is that the outcome of a contract dispute is much more predictable and financially bounded in magnitude. The rule of law is working when people don't need to go to court to know how things will turn out. That is, the interpretation of the law shouldn't depend on the moods of the lawyer or the judge anymore than the interpretation of a piece of code should depend on the server it's running on.

If you cannot financially bound the cost of a contract dispute, you need to bake the cost of expensive lawsuits into the price of your product. And if you look at most class action judgments, a very large amount of the money (often the lion's share) goes to the lawyers rather than the aggrieved party.

With the recent Supreme Court rulings [1,2], it is now possible to include an incantation in your contracts that enables truly binding arbitration:

  Arbitrator [has] exclusive authority to resolve any 
  dispute relating to the [Agreement’s] enforceability 
  including...any claim that all or any part of this 
  Agreement is void or voidable. 
If you are writing a contract of any significance, you should include binding arbitration, you should include this arbitration language, and you should urge the other party to carefully read it up front to forestall any disputes down the line.

One last thought: you might say, ok, that's fine for the business, but what about the individual who doesn't have the time to read 20-page constantly changing terms of service (TOS) agreements? One answer could be a simple contract review site/search engine. For most large companies, the TOS/contracts are the same for all customers. If you actually care about what you're signing before you're signing it (and in some cases, like large enterprise deals, you really do), it could be interesting to put a TOS review site together which drew traffic from reviews of high-volume free TOS's (like Facebook's or Google's) while monetizing by reviewing confidential or lower-volume TOS's (like Yammer or Salesforce).

If you pulled a few thousand TOS from across the web, you really could see whether a provision was truly standard, how many other sites have a similar provision, whether that provision has ever been litigated, and similar metrics. This is one vertical among many in the legal field that is ripe for attack by computer science.

[1] http://www.scotusblog.com/case-files/cases/rent-a-center-v-j...

[2] http://www.scotusblog.com/case-files/cases/att-mobility-v-co...


> The big advantage of an arbitration clause is that the outcome of a contract dispute is much more predictable

That is indeed a big advantage, but not for you. If you are an individual and the counterparty is a large corporation, the predictable outcome is that you will (almost certainly) lose, notwithstanding the merits of the case.


Not a lawyer at all, but I'd guess that's a no.

It doesn't really matter, though; putting blatantly unenforceable clauses in contracts is fairly common practice simply because they _seem_ enforceable, so someone who feels they were wronged is less likely to "waste" their money on talking to a lawyer. (This seems to be most prevalent in employment contracts, especially in regard to non-competes.)


I'm not a lawyer yet, but from the little research I did the answer is: it depends.

Relevant links: http://www.nossaman.com/catching-waiver http://michaelreiterlaw.wordpress.com/2011/07/29/waiver-of-c...

Hopefully that helps.


So, I haven't read the entire agreement, but the "release of unknown claims" sounds to me like:

"You agree that if Bill Gates comes up to you tomorrow and offers you $1B, you can't get out of this. You also agree that if you read a post on HN about our investors being crappy that you can't get out of it. If those events/data were known to you at the time of signing this, you wouldn't sign this document. However, you're saying that you accept the risk that you might find out some information that would have made you not sign this."

In some ways, that makes sense. When doing business dealings, you often don't have information that if you did have would alter your decisions.

I'm not a lawyer, but the difference between this release and a "general release" would be whether discovering information not known by you at the time of signing can let you out of the contract. I remember my partner (who is in law school) talking about a contract where one party had withheld information that would have materially changed the second party's likelihood to sign the agreement. I don't actually remember how the court ruled on it.

In this case, it's possible that the producers of the show might have sent around emails saying, "this team's idea is pure crap, but we need to fill the time." Knowing that might change whether you want to sign up since, if the producers think it's crap, there's a greater possibility that the investors on the show will as well. This also feels a bit on the deceptive side of things. They're withholding their opinion of the team and by doing so it makes the team more likely to sign.

I wouldn't go on some VC reality show, but I think it's partly motivated by the fact that they must deal with lots of different people and some of those people might think it good to sue if they get jilted on the show. As a counterpoint to a deceptive scenario, we could see a suit where the team alleged, "If I had known that none of the investors were interested in X-Industry, I would never have come on the show. They were from Y and Z-Industry and if I had known that, I wouldn't have given away 2% of my company." The retort could be, "well, we can't have investors from every industry and often investors invest in things outside their core". In this scenario, ABC was trying to do good - introduce a team they liked to investors who might branch out into their industry. The ABC team might have believed in good faith that the team was awesome and would persuade the investors. However, the knowledge that the investors were from a different industry might change the team's decision on the contract. Nothing was withheld in a deceptive manner, but it was still data that might have changed the team's decision.

In terms of being able to waive rights, some you can and some you can't. For example, in my state, if you have your own private entry/egress, you can waive your right to have the landlord do snow removal. At the same time, there are many things that renter's can't waive their rights on. Sometimes laws are written as a default. It's important that we've decided a way that this is handled in the absence of some explicit agreement to the contrary. However, other times we genuinely want to establish a floor past which one cannot go. I don't really know a lot about California law.

Again, I wouldn't go on some VC reality show and maybe I'm reading this wrong, but it doesn't sound too outrageous unless I'm missing something. I'm with you - I like dealing with low-key people with sound dealings. However, I don't think people like us are the types that the title conjures up. "Shark Tank" sounds like it's for people looking to make a big bang and get their way - possibly even if it means lawyering up and going after ABC. I'm not trying to defend ABC - I wouldn't agree to be on this show - but this might be reasonable if it's just about making sure that they don't have to worry about people saying, "but I never knew X and if I had known X I wouldn't have signed this" where X is something that wasn't withheld in an intent to deceive, but rather one of the millions of variables that change our decisions. Or maybe ABC is trying to be able to be deceptive and covering themself. I guess I haven't watched the show so I'm not sure what the environment is like.

EDIT: A concrete example (based on on Wikipedia). Right now, Mark Cuban is listed on the show. You want to be on the show because you think Mark Cuban specifically would like your idea. ABC is in contract negotiations with Cuban for the next season. He might not be on the show. Then we get into a big thing of going through emails. Emails show that Cuban was threatening to leave. They didn't tell you that. They reply that it's just part of his hard-ball approach to get the best contract and that they didn't think it was actually going to happen. Seems like a nightmare.


The word "claim" has a very specific legal meaning. It's not just "Bill gates offered me more money, so I want out."

A "claim" is something like--the producers let loose a pack of wolves in the studio and now I am disfigured, or they broadcast on TV that I am a cannibal and eat live children on Thursday nights, and my reputation is ruined. A "claim" is something that you can (normatively) sue ABC about. Bill Gates offering you $8 billion dollars is not a tort committed by ABC. "If I had known X, I wouldn't have done the deal" is not a claim. (Deliberately lying might be a claim, but that's a topic for another day...)

It's a convention in contract law (see meeting of the minds, unconscionability) that you have to have some idea of what you are signing for a contract to be valid, and there's a lot of arguing about what that means state-by-state, etc. California has specifically (attempted to) codify in Section 1542 that if a claim is "unknown" to you it doesn't meet that test. So if you are signing a waiver of liability of injury thinking about things like falling off a ladder, but not considering that the producers deliberately attack you with a pack of wolves, the latter might be an "unknown" claim that you didn't consider when signing the release. Under Section 1542, you could argue that even though you have signed a waiver, the waiver only covered things you would have reasonably considered, which do not include being deliberately attacked by wolves.

What this section does (IANAL) is say "Even though contract law doesn't let you waive a right you don't understand, and even though California has specifically exempted you from being responsible in this instance, fuck that, you're responsible." Which, I don't know if it is an enforceable clause or not, but it's certainly not moral, and it has nothing to do with "got a better deal, now I want out."


What does your last paragraph have to do with the clause you excerpted? This clause appears to have nothing to do with the company suing you. It appears to deal with the reverse.

When you mentioned "people who use lawsuits as a normative way to do business" and one-sided contract terms drafted by "armies of lawyers with nothing better to do" I thought of Apple, and some other IT companies.

Then to my surprise I noticed you are an iOS developer.

Not sure what to think.

If you see a clause in an agreement you don't like, it makes little sense to get angry, just politely ask them to remove it.




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