by Chris SwiecickiLooking for Business Contract Templates? Read This First
In the world of business, contracts keep transactions running smoothly. Contracts define the rights and obligations of the parties involved and provide the legal framework for business relationships. Online contract templates offer businesses an accelerated, often inexpensive way to get some legal coverage and ensure their interests are represented. After all, having a written contract is generally better than not, and having some legal protections is better than having none.
Still, there are potential shortcomings that online contract template sites don’t always disclose. Businesses need to be aware of these before they choose to gamble their business on a templated contract.
Where Online Contract Templates Fall Short
To be clear, I am not saying that online business contract templates always fail. If you have a small business and you need a contract for a simple, repeatable, common task, then an online contract might well cover all the necessary bases and be a valid approach. However, if there’s anything more complex about a business situation, be it the deal itself or something unique about your business structure or practices, it’s unlikely that a templated contract will adequately cover those unique facets. A good contract protects the interests of the business, especially when the other party acts in bad faith. Here are some specific areas where a contract template might not fully cover your business:
Risk Mitigation
Contracts are about more than rights and obligations. They can be powerful tools for risk management. However, risk isn’t universal. What might be non-risky for the average business could be an existential threat to yours. A templated contract is written with the average business in mind and may miss areas where your company is uniquely legally exposed. For example, all contracts expire or have a termination date at which point all provisions cease. Companies may need what’s called a “survival clause,” which continues after the contract’s expiration, and may cover things like confidentiality, indemnification, warranties, and intellectual property rights. Without having a lawyer draft or review your contract, you may inadvertently open yourself up to substantial risk.
Addressing Unique Needs
Of course, there’s more to contracts than risk. Every business has unique circumstances and goals, and contracts can help advance those. One of the most significant advantages of having lawyers write your contracts is the human element. Lawyers can get to know you and your business and ensure that the final contract is tailored to your specific needs. Not only does this result in a legally stronger contract, but it ensures that your contract is comprehensive and relevant and minimizes the potential for disputes in the future. For example, you may be selling a business but plan to keep a handful of customers for yourself after the sale. A standard online contract template might not cover this type of transaction.
Protecting Intellectual Property
If your company has any intellectual property (IP), such as patents, trademarks, or copyrighted work material involved in a project, then it’s a good idea to make sure that it’s protected. You don’t want to sign a contract that gives over your IP to another party—or even opens the door for a dispute. Even if you ultimately prevail in an IP case, handling one can be a huge distraction for your company, moving you from innovation and efficiency to a desperate fight to protect what’s rightfully yours. Given the range of what IP can include, from inventions and artistic works, to brand names and logos or trade secrets like formulas and practices, it’s uncommon for online contract templates to fully and effectively protect businesses in this area.
Legal Precision and Compliance
Like any legal document, contracts need to comply with relevant national, state, and local laws. Failure to comply could result in penalties or, in certain circumstances, render the contract null and void. So, while the contract you find online might be compliant in one jurisdiction or another, it might not be compliant in yours. For example, many states allow non-compete clauses in employment contracts, but they’re essentially outlawed in most cases in California. Even if an online template can handle that nuance, there’s a chance that laws have recently changed, and using outdated language can get you in just as much trouble. By hiring a lawyer, you can ensure that you’re getting a contract that’s up-to-date and compliant.
Image by Szepy by Getty Images by Canva.com
Clarity and Avoidance of Ambiguity
One reason that many people use contract templates is that legal language can be dense and difficult to parse. It’s not that lawyers love big words, but rather that being clear and resolving ambiguity is critical for avoiding disputes and winning them if they do arise. Templates often use generic language, which may or may not be truly effective at ensuring clarity. Such generic language can actually increase the odds of a misunderstanding down the line.
Furthermore, your online contract template generator isn’t going to be able to advise you on the best path for negotiation and dispute resolution. In some cases, that might be arbitration or mediation, saving you time and money. In others, that might not be legally viable or not desirable for various reasons. No matter how good your online tool is, it’s never going to be able to understand the broader context in which a contract is being created, so it won’t be able to help you drive the outcomes that you’re seeking.
When to Enlist a Lawyer for Contracts
A theme in these shortcomings in online contract templates is that contracts aren’t one-size-fits-all. Instead, to be truly effective, they need to be customized to the specific circumstances at hand. That’s not to say that a failure to do so represents an existential threat to your company. In some cases, poor phrasing in a contract could lead to your business having to spend more time and money to complete a project, destroying your margins in the process.
You never want to be forced to choose between that scenario and a possible breach of contract. Ultimately, using online contract templates is sometimes safe. But, if you find that your business or the particular contract you need falls into one of the categories we covered above, then it’s a good idea to hire a lawyer to take a second look, to make sure you’re covered and to avoid mistakes like the misplaced comma that cost Lockheed Martin $70 million.
How Swiecicki & Muskett Help with Business Contracts
At the end of the day, it’s important to invest your resources wisely. However, if you’re having a lawyer review the contract, why not just have them write it for you in the first place? In that case, you’ll get a custom contract for your business with the legal precision, risk mitigation, and clarity needed to protect your interests and reduce the likelihood of a costly dispute down the road. That’s far better than what you’ll get from any of the online legal document alternatives. You’ll also have a lawyer to help navigate the negotiation process. If your company needs a solid contract to help keep its interests protected, contact Swiecicki & Muskett today for a free, no-obligation consultation.