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Comment by pjy04 | Hacker News Reader

What bugs me is that the founders went back on the deal that was agreed upon in person.

Docs were finished, a "closing dinner" was had, a handshake was made on the deal, and then AirBnb backed out. If an investor pulled that on a YC company I'm sure they would be blackballed rather quickly.

To be fair, you'll also need to consider if there is a power imbalance with the company and the investor. Co-founder are the "smaller guys" here.

You could equally say:

"Docs were finished, a "closing dinner" was had, a handshake was made on the deal, and then the investor didn't sign"

And we would be just as critical of that investor.

Are we.. I am not so sure..

AirBnB has never been one to follow the rules, from the earliest days of Craigslist spamming and flouting lease agreements and hotel regulations.

You don't do handshake deals with people whose fundamental business model is "cutting corners wherever you can sneak away with it"

One thing we can all learn from AirBnB: if any group of people you hire for any reason, even on a contract basis, do one bad thing on the Internet one time, haters on the Internet will never let you live it down. Hire carefully.

Yes, because no one ever passes the buck entirely. I believe this accountability is a good thing; see for example this discussion:

This is how Visa works https://news.ycombinator.com/item?id=4396414 (900+ points 3 years ago)

A deal ain't a deal till its signed off.

I make deals and negotiate all the time and I've negotiated thousands of times.

It's a very good sign when you have a verbal agreement but you're a fool if you think that's a finished deal.

It's the quick and the dead - if people are serious about a deal then they need to move quickly, wrap it up and sign it.

If you are selling something (yourself, your company, shares in your company), you should ALWAYS continue negotiations and keep talking to interested parties until one of them signs.

The tardy buyers/investors/employers who think they can stretch it out and take their time miss out, that's all - and it's important to understand that the mistake is theirs for not signing, it is not the seller being unethical. And if you are the sort of person who says "I made a verbal deal and my word is my bond.", then you might get played by people who will take advantage of that and not sign, perhaps hoping for more information, more favorable conditions, a better deal to come along. They won't hesitate to drop the verbal deal if it suits them.

Every negotiation has a number of properties and variables. One of the absolutely key properties is the time profile. If you do any negotiating then you need to understand how to play the time profile. You can say to buyers "I'm offering something good here but only for X period of time." Or "I'm happy to agree to these terms but only for two weeks and everything is back on the table after that." Or "Great that we have a verbal deal, you need to understand I'll be talking to others until I have a signature so if you are interested then you'd better move quick." Or "If you pay the agreed amount on time then I'll give you a guarantee on our services, pay it late, no guarantee", or "OK happy to go with this investment deal, but I want the cash to hit the account by the 8th August and the deal is off if it's late."

Time profile is one of the most interesting and valuable aspects of any negotiation and can completely change the true value of the deal.

If you like it then you'd better put a ring on it.

A verbal contract is just as legally binding as a written contract. It's just that most people don't have authorized audio/video recordings of these kinds of interactions.

Not all contracts... https://en.wikipedia.org/wiki/Statute_of_frauds

Wow, thanks for the link. That's really interesting. Most of those seemed like pretty obvious safety stops, except for the $500 in goods maximum. That one sort of renders verbal contracts useless in nearly all cases, unless I'm misunderstanding.

You are misunderstanding. The $500 limit is specifically for "goods". Not services, for instance.

Unless there's a contract signed at the start that says "no verbal agreement in this process counts as a contract".

Note, that's 100% true (clarifications may stand, IANAL), but I wouldn't be surprised if the VC took steps to ensure no deal was done until the paper was signed.

Technically speaking, a recorded verbal contract isn't simply spoken word - it is a matter of record. It's just that the record is an audio file instead of a piece of paper.

About 11 years ago I did a short stint as a customer support bloke for a telco here in Australia. Recorded verbal contracts were the new fashion, and made life easier for switching phone companies. But every 'verbal' recording started with boilerplate stating that this was a recorded conversation, and constituted a contract. The content was specific points, like in a paper document. It was not a casual conversation. Things may have changed here in the meantime, but that's the way it was then.

I also think that a unilateral audio recording wouldn't stand in a lot of places, given that it's illegal in some places to record a private conversation without informing the other party.

> A verbal contract is just as legally binding as a written contract.

This is the general principle in Common Law taught to law students in Contracts 100, but it really depends on the subject of contract and jurisdiction.

For example, many jurisdictions have legislation requiring all real property sales to be in writing. Many others require certain financial instruments or transactions to be in writing. And so on.

So while a verbal agreement may raise questions of honour and sometimes equity ("equity" as in the body of law, not the moral concept), it can often be considered non-contractual.

IANAL, TINLA.

>> if people are serious about a deal then they need to move quickly, wrap it up and sign it.

exactly, you see this with recruitment.. when a company meets the right candidate they move very fast...

Anytime I did interviews, I had a 24 hr deadline for me to mentally strike out a option. Everytime I got a job, I was contacted almost within an 1-2 hr of doing the interview.

Any delays means they other party has other good options, same applies IMO here as well..

So in this case unless they sign on the dotted line pronto and give a cheque, things are still up in the air

He was gazumped by a much shinier offer because he had nothing in writing.

He concluded that he needs to move faster on the big picture, rather than haggling the correct protocol for picking of nits.

That's not what I get from the story though.

I sense the founders used the VC as leverage. They had a closing dinner the night before and shook on it. The VC was reasonable to expect the paperwork to be finalised the next day.

YC changing their mind at the very next day sounds very convenient...

I imagine that everyone's recollections differ. I'd hate to speculate.

Edit: I seem to have touched a nerve, but I don't know what it is. Can someone explain what I said that caused annoyance? I have the usual embarrassing secret obsession with made up internet points.

I didn't downvote you...

But they way you worded it seems to suggest that the VC wasn't telling the truth. At this stage, he has the benefit of the doubt.

That seems reasonable. I've been in situations where people simply recall events differently, without any sense of intending to deceive.

This is a really important point that many people are strongly resistant to.

False memory is a thing and many people refuse to accept that it could happen to them.

http://www.bbc.co.uk/news/science-environment-24286258

(There was a radio programme this week that demonstrated the process of giving someone a false memory. I would post a link but First Great Western (the train I'm on) blocks a bunch of BBC website.)

I hear you.

I get that a deal isn't final until it's in writing (i.e. signed), but whatever happened to integrity?

All a matter of perspective.

My basic understanding is that deals are complete when signed off. Where's the lack of integrity in that?

Lying is generally considered lack of integrity.

Integrity: "I like your offer a lot" (but then something actually changed, and I don't sign).

Lack of Integrity: "I'm in." (but then I don't sign.)

With all due respect, you'd get crushed by business people who mean business.

But, you can do business and be successful whilst keeping your integrity intact.

I think that integrity is essential in building trust, which is important in any kind of business relationship.

Nice goalpost move.

I think it's generally understood that signed documents describing the terms in detail is what matters. In my mind, integrity is a) not lying about what's in the docs b) sticking to the letter and spirit of signed docs. Until docs are signed, there is no deal

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