It is never a good idea to google a sample contract template and sign your name on it. It is almost better to have a verbal agreement than it is to sign your name on a sample contract template that could work in the best interest of your opponent. Imagine that! First, let’s talk about why formal written contracts are important and then we can discuss why DIY contracts are a bad idea.
Doing business properly requires you to make a small investment in the onset of your business transactions. Contracts are NECESSARY when entering into any type of transaction. Outside a few exceptions, your verbal agreement will constitute a legal contract anyway. So why not make sure you protect your interests and assets by capturing the agreement in writing? I mean if everyone kept their word, there would never be a need to have contracts.
There are many benefits to having your business transactions solidified in a formal contract. Contracts allow you to create your own law in a sense, so you will bind yourself to the law of the contract as long as what you are signing is legal. In addition to the deal points, you decide how the disagreements will be handled and who has what right. You lay out the foundation and intricacies of the transaction based on your comfort level.
Aside from protecting your legal rights, contracts also give you great leverage in the event of a breach of the agreement. You see, a properly drafted contract will likely scare the opposing party from suing you. Business lawsuits are a business decision at the end of the day. If it is likely that the opposing party will lose in court because you properly protected yourself with a well-drafted contract, then you are less likely to find yourself in litigation. So take advantage of that and protect yourself accordingly.
Now that you understand that formal contracts are necessary, let’s discuss why you should never, ever, EVER download a sample contract template online.
Business owners only concern themselves with the deal points of the contract, so as long as the other party is paying the negotiated amount for the services provided or the products for sale, it is assumed that the legal needs are covered. NOT!! It’s never that simple, and you are operating with a HIGH risk of litigation. The last thing a small business owner needs is to set aside money to defend a lawsuit, which is waaaaaay more expensive than hiring a lawyer to do it right from the beginning.
Business owners do not pay attention to the boilerplate provisions (the stuff in the end of the contract) that for some reason don’t seem important to them. Those boilerplate provisions are not only important for protecting your rights and limiting your liability, but they set the tone of any litigation that may ensue. The law does not care that you did not know better, the law assumes you consulted with a lawyer.
DO NOT download a contract from the Internet and think you covered your legal basis, chances are, you did not. You are not a lawyer, and you are not trained to review legal documents. You will not know what you don’t know until you find yourself in a disagreement or worse defending a lawsuit. Most importantly, you may have given the other side so much rights and didn’t protect any of your rights. I have seen this avoidable mistake one too many times in my practice.
Bottom line, being proactive with your legal needs is always cheaper than waiting till something goes wrong. If you consult a lawyer when things go wrong, just know that it will be very costly and more expensive than doing things right from the start. Such a mistake could even mean winding down your business.