read those contracts!

Much to my chagrin, most people do not seem to read the contracts that they sign. More horrifyingly, I’m watching as corporate lawyers increasingly introduce clauses that are manipulative at best, legal gag orders more often. I realize that most people don’t read click-through agreements, but I would strongly encourage everyone to at least read employment contracts and NDAs, even the ones that look like click-throughs when you show up at a company to visit a friend for lunch.

A few weeks ago, I was asked to be an advisor to a project at a company that I will not name. The company is a large, public, profitable company with hundreds (maybe thousands) of employees, many assets, and way too many lawyers. The project sounded quite interesting so I read the contract. I would be obliged to attend regular meetings (?at my own expense – it wasn’t clear?). There would be no cash or stock compensation. Yet, the kicker was this clause:

“In order to protect Company’s Proprietary Information, Board Member agrees that Board Member shall not, while serving as a Board Member, perform any consulting or other services substantially similar to the Services for any company whose business or proposed business in any way involves products or services which could reasonably be determined to be competitive with the products or services or proposed products or services of Company. In the event Board Member has any question about whether a particular project would violate this provision, before undertaking the project Board Member shall seek a determination in writing from Company, which shall be binding.”

In other words, they want me to work for free and agree to not consult for or advise any other company that is any way competitive with them in any aspect of their business. Given this company’s assets, that would basically mean that I could not consult with any company whatsoever. You have got to be kidding me.

So, I wrote them a polite note asking for clarification on this clause. Perhaps they just meant that they didn’t want me to do work in any way that would conflict with just that specific project? They told me that I should seek private legal counsel to analyze the contract because they cannot give legal advice. So now they want me to pay a lawyer to interpret a contract so that I can work for free as an advisor while not being able to work for anyone else in the industry? Needless to say, I said no thank you.

My other favorite contract moment came when I was on a panel with Cory (the master of contract rebuttal). The contract was insidious. Amongst many other problems with that contract, they claimed rights over any IP that I would introduce during my talk and made us legally and financially liable for all sorts of things. Needless to say, Cory and I both refused to do the event until they amended the contract. Their response was that no speaker had ever refused that contract before. ::jaw on floor::

We have become an immensely litigious society. As a result, lawyers shove contracts down our throats left right and center. Most people are not trained to interpret these so they are expected to hire lawyers to do so. (Not so bad for the legal profession, eh?) This really upsets me. Are there ways that average people can learn to interpret contracts and push back at them? I’ve gotten better at it after having read so many of them, but I don’t think most people know. I also think it’s important that people learn to reject contracts. I reject most NDAs. I won’t sign them because they are usually so broad that they put me at risk in every direction. I can’t imagine journalists sign them, do they?

I vote that there should be a “stupid contracts” equivalent of Chilling Effects because I think that these contracts are also chilling participation of all sorts.

In the meantime, I’d like to encourage everyone to read those nasty contracts. And stand up for your rights. Don’t just sign them. And don’t just assume that they won’t actually enforce them. That’s not a good standard to set. This is particularly critical for academics and others who subsist on freelance work and the intellectual output they produce. And if you’re a company, think about the nasty contracts you’re imposing on people. Does your legal team need to be that psycho? My hope is that if people start reading and refusing, companies will rethink their policies. But it all starts with reading the damn thing.

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24 thoughts on “read those contracts!

  1. Xianhang Zhang

    I had to go through this with a short term employment contract with a small internet startup. I was uncomfortable with some of the terms and I met with my boss to have them amended. He was cooperative and wished he could do it but he would have had to go through a giant process with the people *he* was answering to who were funding him. It was possible to deviate the standard procedure but would have required many manhours of work from multiple parties and, frankly, just wasn’t worth it.

    As always, it’s a matter of incentives. Nobody inside a large company ever got fired for *not* hiring someone brilliant because the contract was onerous but people could get fired for hiring someone who then did something detrimental which wasn’t covered in the contract.

    In the end, we managed to work something out but it’s not an ideal situation to be in.

  2. Bertil

    Actually, I offered a solution in a recent blog post:
    (Yes I have a blog, but according to stats strictly noone reads it, at all.)

    Oddly enough, the recent ‘iBrick’ meltdown happened *in spite* of having a bold warning and a three day geek press coverage, unusual.

    Cory D. signs NDAs? >8^o !
    I guess he reads them, but I doubt any lawyer managers to have him sign anything significant, does he?

  3. Kevin Marks

    I recommend just crossing out clauses you dislike, or amending them to be mutual. This is a good way to smoke out asymmetry. Nothing like giving a matching NDA back to a bigco to see if they are serious or not.

  4. Michael Clarke

    How I hate NDAs! I did work for a CEO once who refused to issue them on the grounds that if someone wasn’t going to respect them, they wouldn’t be intimidated by the threat of litigation and that if someone would then a handshake and a promise was all that was needed anyway. A rare attitude, unfortunately.

  5. Livia Labate

    At first it feels like an impositions; but it is extremely important to read through these details and debate them until there is clarity (and if it’s not in your best interest, walk away).

    I have to read a lot of boring contracts so I’ve started playing this game with myself where I try to spot misleading clauses and respond to the author translating it to the simplest possible plain language – showing them what a lame game they play. It’s like legal mad libs; makes it a little more fun.

  6. Shai

    There was a great book published a couple years ago that had to do with the conservative movement’s manipulation of common law – one chapter dealt with the way corporate lawyers have argued for all sorts of insane precedents in contract law. The book is Un-Making the Law, by Jay M Feinman. Fascinating stuff!

  7. Tim

    I recently signed a contract with a sports publication to live blog football games for them. Your blog made me go back a read what I signed again. I was pretty sure I read it throughly, but reading this made me a little uneasy and I went back and read it again.

    Luckily there wasn’t and double talk or “Trickeration” in the contract I signed. Although there were a few typos….

    I will definitely pay closer attention to all of my contracts from now on…

  8. Josh Peters

    Just curious: did you alert the rest of the board to the heinous contract they likely didn’t read? It’s not the fastest way to enact change, but every little bit of righteous outrage caused can add up.

    Unreasonable contracts are the first reason I don’t have a cellular phone.

  9. joe

    Not only should you read them, but you should understand them… and ask for help understanding them. One tactic that works well if you are suddenly facing a contract for something like a panel, a lunch or even a paper submission is to read the contract and cross out (and initial) all the terms that you don’t agree with or don’t understand (and you can add your own terms like specifying a creative commons license, etc.).

    The reason this tactic works well from a legal perspective is that contracts are meant to be negotiated (unless they are the adhesion variety… think “swim at your own risk”), not forced upon one party. If you have to sign your name in ink, you can also modify the agreement with that same ink instrument (cross out, add, etc. … always with initials).

    If they don’t notice the additions, fine… go on about your business. If they do and say they won’t accept anything than their standard agreement, say, “Then I can’t participate in your event/lunch/publication.” This may be especially difficult for young scholars facing their first publication… but, seriously, there will be plenty of publications in the future and you will want to make sure that the first few that you hammer out are done on your terms (for example, specify that you’re allowed to put a copy of the paper on your own website for noncommercial distribution, etc.)

  10. Silona

    In a fit over frustration – I registered

    as a potential NPO that screens and rates contracts for web and software users including privacy policies.

    It’s funny in the gaming industry – policies like that are consider to be the mark of a noob.

  11. Hollie

    This is why it will come in handy that my brother is close to being a lawyer- free legal advice when I go to publish my compositions. Just waiting for the bar exam results!!!! 🙂

  12. John Caddell

    My favorite experience was taking a three-day course and on the THIRD day they passed out a nondisclosure agreement that was so restrictive you basically couldn’t tell anyone that you had even taken the course, never mind any of the information in it!

    I resisted signing it, talked to them, and even considered walking out at that moment. I had planned to blog about the course, which I thought they would appreciate. They didn’t. I signed, and never revealed anything about the course to anyone. Weird.

    Also, did you know that the Apple software license agreement expressly prohibits you from using their software for the operation of nuclear facilities?

    I think if anyone figured out how to use iTunes to run a nuke plant, that person should be awarded a Nobel prize, not prosecuted.

    Thanks for a neat post, Danah.



  13. Paul Schreiber

    danah, you need to name names here. These companies and conferences aren’t going to get their act together unless they are publically shamed in to doing so.

    Also, did you know that the Apple software license agreement expressly prohibits you from using their software for the operation of nuclear facilities?

    I think if anyone figured out how to use iTunes to run a nuke plant, that person should be awarded a Nobel prize, not prosecuted.

    this is pretty standard. java does the same thing. i met MS does, too. they can’t prosecute you — violating a license isn’t necessarily criminal offence. (i don’t think breach-of-contract applies here.)

  14. Barry

    The particular extract you quote refers to the position of Board member – is this an indication that the particular position is on the Board of Directors of this particular un-named corporation? If so, it is ighly likely that attendance would go unremunerated. In addition, it is hardly a new proposition that a board member owes a duty of loyalty to the entity being served: it has been a principle of company law ever since there have been companies, borrowed from the trusts that preceded them, and in most jurisdictions (including US ones) enshrined in statute law. It is a perfectly understandable proposition that shareholders would want those who manage the company on their behalf do not go out and compete with the company.

    On the other hand, if you are not a Board member and in fact just the advisor, then the clause quoted does not apply.

  15. zephoria

    I realize that this is normal for a corporate advisory board but this is not that role. Earlier in the contract, they define members of the advisory team as “Board Members.” Corporate Board Members are typically given stock, monetary compensation and other such benefits. The role of the product advisory team does not include that.

  16. Liz

    a thoughtful post as always. i once had a contract put in front of me from a potential client that upon careful reading basically said they would own my thought process. they, too, said no one had ever complained about it before. i didn’t sign. i’m not working with them. my lawyer was happy and considers me well trained.

  17. Debbie

    It was interesting to read Bertil’s blog (see above link) discussing his logo in lieu of contract idea–essentially applying the Creative Commons principle to contract law.

    (Bertil, check your stats. Someone has now read your blog.)

  18. David

    Ed Foster’s “Gripelog” website has collected by both concerted effort and additions over time a great many of such contracts and terms, especially in computer, software, digital tech, Internet and other areas. Perhaps you can find in his archive an old thread about a hotel group that (but no longer) got your unread agreement that the hotel acquired copyright and another ownership interest in all communications transmitted by guests using its network.

  19. Christopher Herot

    You were right to ask for clarification, but they did you a favor by refusing to answer. There’s probably another clause in that contract that says any other agreements, written or oral, do not apply. No matter how much you trust the people telling you what they consider “competitive,” it won’t matter what they say when they leave their jobs and the company sues you anyway.

    I’ve found even the largest organizations will negotiate modifications to contracts if there is someone there who really wants your participation. If not, you are better off not dealing with them – they won’t follow your advice anyway.

  20. David R.

    I’m a big corporate licensing lawyer – the boogyman of this post, if you will.

    I write clauses like this all day long because I like to go to the club in the evenings and laugh about my treachery over fine Scotch and a cigar with the boys…

    … or not … seriously, the reason that we “big corporate lawyers” write clauses like that is that we are asked for one size fits all agreements to cover limitless possible sets of factual circumstances. Do you think anybody tells me what the Board you are on will be discussing? Do they tell me if you will be consulting on some little side project or designing the technology at the heart of the companies’ next product line? Do they tell me if you have founded three start-ups in our area and are likely to go start a fourth, or if you are just a local friend of a friend? No, they don’t.

    They come to see me before they even know who you are and ask me for a “quick and easy form of NDA/Consulting Agreement/Whatever.” In those circumstances, under the cannons of legal ethics (zealous advocacy), I have two choices: I can either (1) push back and say “There really is no such thing as a form – every circumstance is different and merits different levels of IP protection and aggressiveness on indemnity, etc. Come back and see me when you know the deal, and we will work up a draft” or (2) I can push a button and give them the most black-hearted one-size-takes-all form in the file and leave it up to the recipient to read it and push back. I’ll tell you, lawyers who live by number 1 don’t have many repeat clients, unfortunately.

    So you are getting the crummy one-size-fits-all-over-agressive contract because it would take hours of work and expense for me to tailor an agreement to a situation where the non-compete and IP language are appropriate for you personally and yet still protect the company. If you, personally, merit that expense, then by all means, push back and the client will come tell me we need to revise the document and we will.

    However in most circumstances it probably isn’t worth your time or my time to try and get to the “perfect” document. Instead, you can be comforted by knowing that it is going to cost my client six figures if they decide to try and sue you on this document – so short of some monumental disagreement you are pretty safe. These documents are meant to keep the clients safe from being sued by you (which also runs up a six figure legal fee at BigCo almost instantly), more than to exert any real control.

    My $.02.

  21. Stuart Henshall

    Danah, Great post; we’ve all been there. For most of us… getting the lawyer involved would wipe out the profit in the job. I’m convinced that representing as a company – mutual NDA, is better than being the individual. Still these are “costs” they say of doing business. I don’t find the same issues when working with clients overseas. Best thing is not to sign them…

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