Paul Ceglia, notoriously known in the news as of late as an unethical entrepreneur with multiple run-ins with the law, claims a 2-page contract from 2003 with Facebook founder, Mark Zuckerberg, is valid and entitles Ceglia to 84% of Facebook.
On June 30, 2010, Ceglia filed a lawsuit against Facebook in a Allegany County Supreme Court in New York. A copy of the complaint can be seen here.
Ceglia claims that in April 2003 Ceglia agreed to provide some web development work for Zuckerberg in exchange for 50% of the resulting entity, Facebook, plus an additional 1% every day until the work was completed. Ceglia has apparently 
produced a copy of the contract, which is 2 pages long.
Last week Ceglia produced in court a copy of the purported $3,000.00 cashiers’ checkpayable to Zuckerberg in April 2003 as part of their work-for-hire arrangement. There have been three prior contested claims to ownership in Facebook – all raised by Zucerkberg’s former Harvard classmates.
In July of this year, Facebook hit 500 million users. Zuckerberg spoke candidly with ABC’s Diane Sawyer about this milestone.
Lawyers for Zuckberg admitted in court that Zuckerberg did sign a contract with Ceglia, but that the agreement was to any past entity, as Facebook.com was not in fruition at the time the parties mutually consented to the April 2003 contract. Others report that Facebook alleges the contract attached to Ceglia’s complaint is forged.
In March of this year, Bloomberg Business reported that Facebook was valued at $11.5 billion.
The legal issues in Ceglia v. Facebook should be a lesson for start-ups and entrepreneurs. Whenever you draft a contract, you should consider all possibilities. Creatomg a timeline with limits can avoid what Zuckerberg is facing. Moreover, when entering into business dealings, it is best to put the agreement in writing, so that there are no misunderstandings. Creating a ”definition of terms” section will also help avoid later disputes about the meaning of a contract. Ultimately, for there to be any contract, there must be a “meeting of the minds.” That is, all parties must understand and agree to the terms. There must be consideration for the contract as well – typically one performs a job in exchange for compensation. Here, Ceglia provided work in exchange for a percentage of some variation of Facebook.
Generally, in Washington State, the statute of limitations (time in which you must bring a legal action) for a breach of contract claim for a written contract is six years, for an oral contract it is three years.
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