A verbal agreement from an honest businessperson can be as good as gold. And when someone reneges on a verbal agreement it's generally a clue that they wouldn't be great to work with.
But this is surprising from Google. Most likely a one-off mistake
In California verbal offers can be considered binding when made by an authorized representative. This has been litigated both with respect to the entertainment industry and the high tech industry.
Agree. This is nonsense. Furthermore, according to the article Systrom said they had not received any formal offers, which is confirmed by the Twitter sources. "Verbal offers" don't count. They cannot be binding, because an offer to buy a company must be quite detailed. A term sheet is a formal offer. However, if one is "given" without a signature and by a person without formal authority to make an offer, it also doesn't mean anything.
Someone jumped the gun and thought a verbal offer meant something. Is this really worth discussing? Its not like we'll get the truth of what actually happened or why.
In your case there's an excellent chance the deal wouldn't have gone through even if you had agreed to their initial offer. The something that happened would have happened anyway, and a firm like Se____a would probably not worry too much about retracting an offer (assuming it was a term sheet or a signed-but-not-closed contract with a MAE out.)
If I verbally accept an offer that was never put in writing, I feel like one of three things could happen:
1: there is something materially and surprisingly bad in the contract (equity or cash isn't as described)
2: there is something that is arguably not material, but which is surprisingly bad in the contract (something to do with vesting schedule, clawback of a 'signing bonus')
3: everything is as-expected.
In case 1, it's clear that they have materially changed the terms, and I am no longer bound by my verbal acceptance (which was of a different offer).
In case 2, they can argue that what was changed isn't material, and so I'm still bound. But if they say that, I would reply that if it's not material, then they should have no problem changing it back to the originally-discussed state. If they don't, I walk. It's not like they can force you to work for them, and they would presumably not try to ruin your rep over it because you could probably do more damage to them (by posting on HN, for example).
You assume the offer was real and made in good faith. If, however, Microsoft offered Google the chance to jointly bid without any intention of really doing so, Google's interpretation still holds.
Verbal offers do count, regardless of whether the person handing the term sheet over had authority, Instagram was required to act in the reasonable interest of investors and find out if the offer had teeth. Avoiding "formal offers" by evading "formal authority" is rather obviously not in investor interest.
This is most certainly not nonsense if true, though it is a bit ridiculous given the windfall for investors.
If you have ever been a major shareholder in a company, you would understand - not considering legitimate offers for acquisition is a major no-no and violates the most important responsibilities of a the corporate stewards.
It’s not wrong though. They are offering their terms, to which you are providing a counter offer that includes your terms. Standard negotiation practice.
Not following through with the fully executed agreement is what would be dishonest.
A verbal agreement from an honest businessperson can be as good as gold. And when someone reneges on a verbal agreement it's generally a clue that they wouldn't be great to work with.
But this is surprising from Google. Most likely a one-off mistake
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