It was not at first blush an idea that sounds like it would be worth millions. The co-founders were university students with the idea that people could send photos that self-destruct shortly after arrival at the destination device. They agreed to go forward on a handshake, but later, when the company named Snapchat took off and was worth millions, two of the three founders locked the third out. It’s difficult to resolve a breach of contract action where the parties started off on an oral agreement, but handshake agreements occur often, both in Florida and throughout the country.
The most famous co-founder dispute of an online startup was the one between the founders of Facebook. The Facebook contractual dispute is portrayed in an award-winning movie. Twitter’s wrangling is described in a published book. Other co-founder disputes have occurred and they are continuing to occur.
Although these young entrepreneurs must have thought that using a lawyer was too formalistic for trusting friends, they may have saved a lot of money, time and emotional investment if they had put their agreement in writing. With the understanding down on paper, people’s agreements are memorialized, and the intentions behind each provision can be recalled much more accurately. Having that extra degree of certainty may even prevent life-long antagonisms and allow the parties to retain their friendships to one degree or another, even after a breakup.
It can be important for entrepreneurs in Florida and elsewhere to have legal counsel on board in order to get it all down accurately and in clearly recognizable language. The specification of the important elements of the agreement will save substantial energy in disputes that would otherwise have been based only on hazy memories. The enthusiasm of the moment, however, has led many startup participants to opt for the oral agreement. This leaves the group without a rudder to steer during a stormy breakup. The fact is that many startups have ended in turmoil and breach of contract actions between the founders.
Source: sfgate.com, “Feuds at startups show how handshake deals can blow up“, April 3, 2015