Last Sunday I ordered a mouth-wateringly delicious pepperoni and pineapple pizza—don’t knock it til you try it. After waiting 45 torturous minutes, I was shocked when my pizza consumption was delayed even further because delivery guy forgot a pen for the receipt.
As he memorized the amount of tip to add to my card back at the restaurant, I thought, “those iPhone finger signatures make life so much easier.” The same thought occurred to the founders of Shake—the app that puts contracts at your (literal) fingertips.
What is Shake?
Shake boasts the ability to “create, sign and send legally binding agreements in seconds” by answering a few questions for a form agreement, signing on your phone, and sending it to the other party, ready to be signed on any device.
Though the types of forms are limited, Shake’s contract library covers basic contract needs for startups and individuals. The startup bundle includes 11 common startup contracts, like founder accord, funding agreements, and freelance and consulting agreements. The individual side ranges from employment contracts for nannies to a wedding bundle with common event planning contracts.
If you can’t find what you’re looking for, the create-your-own agreement option lets you “create, sign and send a virtual ‘napkin contract,'” perhaps an homage to the drunken enforceable napkin contract in the landmark case Lucy v. Zehmer.
The contracts are simple, clear, fast, and free—and all without an attorney. But the real question is, are they really effective?
Legally Binding*, With an Invisible Asterisk
While you might not care whether Shake’s roommate agreement would be enforceable in court, the stakes are a bit higher for a startup using their non-disclosure agreement. And just because you don’t see an asterisk in their slogan, doesn’t mean it’s not there.
Buried in Shake’s Terms of Service is a warranty disclaimer, denying “any claims about the quality, accuracy, legal sufficiency, legal enforceability, or appropriateness of Shake for your needs.” It all boils down to one ominous statement:
“In any action you take through Shake’s products and services, you are representing yourself.”
As daunting as that may sound, people make legally binding agreements without attorneys on hand every day, often without even realizing it (maybe that’s the real ominous statement). But, there are a few things to watch out for.
Can Shake Create an Enforceable Contract?
The Answer: Probably
The elements of a binding contract are pretty easy to achieve: offer and acceptance, consideration, and a “meeting of the minds.”
1. Offer shows a party’s willingness to form a contract. Offers are generally valid if you communicate your intent and proposed terms to the other party. Sending a Shake contract would certainly cover it.
2. Acceptance shows a party’s agreement to the offered terms. Acceptance is generally valid if you communicate intent to accept in a way authorized by the contract. Shake’s contracts imply authorized acceptance by signature and return.
3. Consideration means both parties have to give up something of objective value. As long as the consideration is actually possible to perform—and it’s not illegal—you should be good to go. It usually doesn’t matter how low the value is, or if one side’s value is way higher than the other. But, if you’re planning on trading a matchstick for a Maserati, you might want to double check—a minority of courts have a cutoff for how low in value they’re willing to go.
4. Meeting of the minds means both parties have the same understanding of the agreement. You don’t have to agree about all the tiny details, just about the essential terms. But, it’s up to the user to make sure it’s clear on both sides of the table, and this includes all of the underlying assumptions. If one party is mistaken as to a main assumption, the contract may not be enforceable.
The Roadblocks: Laws and Legalese
Assuming your contract isn’t ridiculously unfair, there are still some legal roadblocks that can invalidate an otherwise enforceable contract, like capacity, illegality, and agreements to agree.
1. Capacity: Most people are considered to have the capacity to enter into a contract, but there are three major exceptions—the three I’s: infancy, insanity, and intoxication.
Infancy isn’t limited to literal infants; it usually means anyone under the age of 18, but a few states use ages between 19 and 21. “Infants” can still enter into binding contracts, but they have the right to cancel them, which lasts for a short time after reaching the age of capacity.
Insanity is pretty self-explanatory. If a party is insane, they have the same right to cancel contracts. But, if a court has ever evaluated them and officially judged them legally insane, then any contract they agree to is completely void.
Intoxication goes back to the meeting of the minds thing. If someone is so intoxicated that they don’t understand what’s going on when they agree, they have the right to cancel too.
2. Illegality: If your contract involves something illegal, no court will enforce it. #Logic.
3. Agreements to Agree: Agreeing to form a binding contract at some point in the future doesn’t count as a binding contract in itself. Probably not an issue if you’re using one of Shake’s templates, but it’s good to keep in mind for those “virtual napkins.”
These are just a few of the main categories—each jurisdiction has its own rules and idiosyncrasies. On top of these, Shake’s Terms of Service clarify some issues that might otherwise cause a snag, like modification, termination, and rescission.
1. Modification: People can modify a contract’s terms even after it’s signed. If you chat with the other party—in writing or otherwise—about making some changes after you sign, those changes might be be binding. More importantly, the original contract won’t account for them, and could even say something conflicting.
2. Termination: Unless it becomes impossible to perform, both parties have to agree to terminate a contract before it’s up. Deleting it, deleting Shake, or deactivating your account won’t affect the contract, and it definitely won’t terminate it.
3. Rescission: Similarly, deleting a pending agreement won’t rescind an offer. You have to notify the other party before they accept, and Shake doesn’t notify them of deletions.
The Remedies: Virtually Non-Existent
Even though Shake’s users could have an enforceability pitfall, that warranty disclaimer of theirs certainly won’t. Under the Uniform Commercial Code—the set of officially recommended contract laws—disclaimers of express or implied warranties are generally enforceable. Not every state adopts every part of the U.C.C., but this part is pretty prevalent. Shake’s Terms of Service are governed by New York law, where, since the warranty disclaimer is expressly written, it would have to be unreasonable to be unenforceable.
The Bottom Line
Shake is a great tool for simplifying contracts and their costs. If the contract is a simple one, Shake should be able to get the job done. But the more complex the agreement, or the higher the stakes in its subject matter, the more likely you’ll want once-over from an attorney who knows the jurisdiction’s specific rules.
Robot Lawyer 