September 9, 2009 - In paper we trust?

Perhaps you've observed a peculiar ritual in recent years - two strangers meet for the first
time to discuss a mutual business opportunity. One or both pull out a magic document
called a "non-disclosure agreement," or just "NDA" to the pros.

They enter into a short debate about which NDA should be used, whether or not it's a
"mutual NDA," and whether or not each of them is actually allowed to sign such an
important document. Assuming that they both have been bestowed with sufficient
authority to sign said NDA, they proceed to execute the agreement.

But here's my favourite part of the ritual: quite often these two people proceed to divulge
some of their most treasured business secrets to each other. Why would a person reveal
something so important to someone they've just met? Would you walk up to a stranger
downtown and give them your PIN number? The NDA, however, somehow makes it all
work out fine.

You may be sensing a bit of sarcasm here. And you should, because I think we've
become too trusting of paper agreements. We've been lulled into thinking paper
agreements will protect us when the person on the other side of the agreement decides
they don't feel like honoring it. The reality is that our courts have allowed people to get
out of pretty much every type of agreement you can think of. And you wouldn't believe
the excuses people have used for getting out of a signed agreement. Here are some
classics:

• The agreement was too long, so I didn't read it.
• I wasn't given enough time to get advice before I signed it.
• Other people were able to get out of a similar agreement.
• I had plenty of advice before signing it, but now that I've thought about it, and
  with the passage of time, I now realize that the agreement isn't reasonable, so I no
  longer agree to it.

In addition to excuses like these, agreements are increasingly being thrown out when
contested. Judges are referring to them less and less and tending to lean toward the party
that is perceived more as the victim. In fact, the more you believe an agreement protects
you, the greater likelihood it can be used against you if the agreement is contested by the
other party.

This is sounding pretty gloomy isn't it? Techies like us tend to assume that laws are for
real. We use the laws of physics in our electronic designs, and they don't let us down
when we push the power button for that first time. I believe there is a technical solution
for this problem. Engineers refer to it as the workaround, and here it is: "If you can't be
sure that other person's signature is for real, then at least make sure the other person is for
real." Far more important than the signature of the other person is the character of the
other person.

Do some research. You do reference checks when you're considering hiring a new
employee. Do the same with someone with which you intend to enter into an agreement.
And look for subtle cues. For example, watch out if the person talks about all kinds of
legal details, or how they had to take a previous "bad guy" to court over some injustice.
To quote Elmer Fudd, "Be vewy, vewy careful."

I once rented some office space from a landlord whom I later discovered employed a
whole team of lawyers that spent the majority of their time suing their tenants. Doesn't
sound like fun, does it? I completed that lease after a few years, and now I rent from a
company who aren't professional landlords at all - actually they sell gardening tools, most
of which are harmless.

Bad paper
What should you do if you discover that an agreement that you've signed benefits the
other side more than you? You may not agree with my views on this. For what it's worth,
I have given myself a life goal of never having to appear in court before I die. This
unfortunately might mean some unpleasant things, such as writing off some financial
losses rather than fighting them in court. It might also mean having to swallow your
pride, and apologize to someone, even though you're positive they are in the wrong, and
you would really rather detonate a small nuclear device under their rear end. The apology
could save you countless dollars, and many years in court.

No paper
Please don't conclude that I feel signed agreements are worthless. Not at all. Assuming
you're dealing with high-integrity people, signed agreements will definitely protect you.
Not because of our laws or courts, but because they will do what they promised - just because they promised it.

So go ahead, depending on who signed it, you can trust the paper that's under it.
Michael Wakim is the founder and CEO of Fidus Systems.