Legal Bytes: Shake – the app that drafts contracts in minutes

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When I first heard about “Shake,” a free iPhone app that generates “tailored” contracts, I could not help but download it to see if my job as a contracts lawyer was in any serious jeopardy. Shake’s stated mission is to “make the law accessible, understandable, and affordable for consumers and small businesses.” The app, which was first launched in April 2013, is, in fact, surprisingly simple and easy to use.

Once you download and register your name, the home screen gives you six contract options, including “freelance/hire,” “keep confidential,” “buy/sell,” “rent/land,” “lending money” and “create your own.” From there, depending on the type of contract you choose, the app prompts you to enter a handful of deal specific questions.

Then the app adds several automated “boilerplate” provisions and a ready to sign contract is immediately generated. In total, a finished contract is about the length of a one page Microsoft Word document. The app’s creator is not a lawyer, but the idea for the app comes from his wife, who is an attorney, citing inefficiencies and the expense of lawyers as a source of opportunity for their software.

On my first try, I chose the freelance agreement option and the app prompted me to answer a few questions, including the names and location of the parties, the scope of work and the payment terms (price, time for payment and whether there would be any late payment penalties). Start to finish, it took about one and half minutes to generate the ready to sign document.

There is no doubt that Shake accomplishes its objective of quickly providing simple contracts to its users. However, those attributes bring a number of pitfalls from a legal perspective.

A user who is looking to generate a contract in a matter of minutes is unlikely to spend much time reviewing the contract or discussing its terms to make sure it meets the parties’ needs and fits the deal. One of the most important aspects of a good contract is that it creates an overt understanding between the parties to all the terms of the deal and establishes a way to handle a variety of scenarios.

With Shake, there is unlikely to be any discussion on the agreement’s automated terms. Accordingly, the parties will hardly know what they have agreed to and if a dispute arises, the resolution provided by the contract might not be one the parties would have wanted. There may even be enforcement issues if a party does not read or understand the terms of the contract, as one could argue that there has not been a meeting of the minds.

Even worse, the parties will not know what terms are missing. Shake is designed to be simple, so the automated “boilerplate” is severely limited. As such, there are many significant terms missing from Shake’s agreements that are common in standard contracts, such as indemnification language or insurance provisions.

While one could argue that most contract boilerplate is not necessary for a basic agreement, one should at least know what is missing and make the choice to eliminate contract provisions that they feel are not necessary. A good contract is one that strikes the proper balance between thoroughness and simplicity, but Shake seems to skew too far to the latter. I am unaware of any option to add to or change the automated boilerplate.

As a company progresses and becomes more complex, it may not realize the point where it has outgrown the simple Shake contracts. An evolving business may find itself haunted by the Shake agreements it entered into when it was a young company. The cost of cleaning up the mess caused by a bad contract is certain to outweigh the cost of paying a lawyer to review and add value to the contract up front.

Nevertheless, it is immediately apparent that Shake aims to provide a product for the most basic form of contractual relationships, rather than the more significant business relationships that lawyers customarily deal with.

Another article about Shake reported that there is a $45 billion market for legal services for low-to-middle-income earners priced out of the formal legal industry. Shake aims to tap into that industry segment.

The app merely provides a method for getting cheap deals done quickly, on a medium that is at least better than a napkin, for a group of people who are probably not going to hire a lawyer anyway. As such, the likelihood that Shake will have any serious effect on the current legal field is minimal. If anyone should be concerned, it is companies like LegalZoom or Rocket Lawyer that offer similar services but are undercut by Shake’s free-of-charge app.

For now, it is safe to assume that my job as a contracts lawyer is not in jeopardy — not necessarily because Shake is insufficient — but because it is aimed at an entirely different market.

However, lawyers should not ignore the fact that technology is rapidly invading the legal field, “shaking” up an industry that has been defined by tradition. Lawyers should at least be equipped to assess these technological advances, differentiate themselves and justify the benefits of a lawyer’s knowledge and expertise.

Jeffrey Kowalski is an associate at Boylan Code LLP, concentrating his practice on general corporate, real estate and municipal matters. Contact Jeff at (585) 232-5300 or [email protected].