HOW USING AN INTERNET FORM CONTRACT CAN GET YOU IN TROUBLE
REASONS NOT TO USE A FREE CONTRACT FORM
If you do a quick google search for a particular contract on the internet, you’ll find all kinds of forms you can view, or even download, to make use of for your business. The best part is these documents are free, and by taking the do-it-yourself approach you can skip your attorney and all the costs that come along with him. You are, after all, a wearer of many hats as a business owner so it is only natural you would take the initiative to be the legal department as well!
But, despite the upside noted, there are quite a few issues that come along with using free internet forms instead of working with an attorney.
1. DID YOU EVEN PICK THE RIGHT FORM?
You may think you know what the document you need for a particular purpose is called, but when a deal is on the line or you need to make sure the contract does what is supposed to, an assumption is just that. If you assume wrong, you may end up with an agreement that doesn’t do what it needs to in order to protect you or your business. The form may be missing key provisions and terms for your particular deal or circumstances. At times, a business will have unique risks it faces that are unlike those a standard form embodies. In fact, from the perspective of a lawyer, if I start with a form it is always customized to my client. Many times, the end product is entirely different than the starting point. Forms are great, and I trust mine because I have used them for years or they come from expert attorneys by subscription services I pay thousands of dollars for every year so I have reason to trust.
2. DID YOU GET TO PICK HOW DISPUTES WILL BE RESOLVED?
When I am working on a drafting project, I like to assume the contract will be breached at some point. The question is always how are we going to handle the dispute when the deal falls apart. This isn’t a question for me, but one for my client based on their preferences after being informed of the options. Most of the time the client has never been in a lawsuit or to an arbitration, so the pros and cons of each need to be explained. Do you know what arbitration is? If not, why is it in your form contract? Did you just sign up for federal or state court for disputes? More importantly, in what county, city, state? New York arbitration!? It is prudent to sit down with your attorney and plan for issues and what method of dispute resolution is best for your business. From there, you can draft provisions to make sure the other party agrees to your preferences and you don’t end up resolving disputes in a way you hadn’t anticipated.
3. WHAT YOU DON’T KNOW…
When you use a form, you don’t know why the contract was initially drafted (or by who!). You also don’t know what the drafter cut out or inserted or how it effects the rest of the provisions. If the contract is ambiguous because of conflicting provisions, perhaps someone copy and pasted two provisions which accomplish similar purposes in opposite ways, that can be held against you as the drafter under the rules of contract law. You could be missing a key provision or including terms that are unheard of for your type of business or deal. You won’t know unless you compare it to many other forms in an attempt compare and contrast terms based on your sources, which are questionable for reliability in the first place. The problem is you don’t know the answers to a lot of questions and it is worth it to consult an attorney in order to make sure everything is in order and the contract is put together the right way.
4. A FORM CONTRACT YOU DOWNLOADED IS NOT “YOUR FORM CONTRACT”
The contract you use should be customized to your deal so that the risks and circumstances that arise are addressed by terms favorable to your business. A free contract may omit language necessary to adequately cover you in the event of an occurrence. Hiring an attorney to draft a form contract that is custom for your business needs is a relatively small investment when compared to the risk of ending up in court or arbitration with the opposing party to decide how to handle a dispute or how to interpret a term. In the event this is a transaction that is routine for your business, it is especially valuable to have a custom contract drafted for your use so that it can be your form contract and go-to which can be proposed to other parties during negotiations.
5. WHAT JURISDICTION IS THE FORM FROM AND IS THE LAW DIFFERENT WHERE YOU ARE?
Like it or not, the law is not the same in every state. Unfortunately, uniformity in contract law is not guaranteed. Some states will have court cases interpreting a contract provision one way, and some states will interpret that same provision in another way. Some states will not enforce a provision and some will. An attorney can help you follow the law that applies for your business and will know the language necessary to accomplish your goals
At the very least, if you are going utilize a form you have found online and attempted to draft for your situation, have a lawyer review the form to see if it will work before you sign the agreement. Contact me for custom tailored contracts and form agreements for your business. I typically meet with clients or have a phone consultation to learn about your business, your clients, customers, and deals, and draft in a way to minimize risk and protect you and the business.