The Dangers of DIY Contracts
Contracts are an essential component of effective business management and development. Savvy business owners recognize the value of contracts but often explore ways to reduce the cost of obtaining them. In some instances, business owners attempt to create their own contracts by using templates available online.
However, creating your own contract is fraught with risks. What you do not know can, in fact, hurt you. The following are examples of the potential risks you face when you choose the do-it-yourself (DIY) route.
The Contract May Leave Out Key Provisions. Creating your own contract in an attempt to save money can run the risk of unintentionally leaving out key legal terms and clauses that protect your interests as a business owner. Contracts created with online templates are often overly broad or vague, resulting in agreements that, when analyzed, fail to provide the specific protections that make the contract valuable. Attorneys have the experience and resources to craft contracts that include the most important provisions to protect your business.
Your Contract Could Be Unenforceable. Failing to understand the legal landscape can result in crafting a contract that, when litigated in court, is found to be unenforceable. For example, specific laws vary by state. As a result, a contract that is appropriate in one state could fail in another. For instance, employment agreements with noncompete provisions may be enforceable in Texas but unenforceable in California. In this case, the unsuspecting individual who uses a Texas contract for an employment agreement in California could be left with, at a minimum, a clause that will be thrown out, or quite possibly an entire contract that is useless. Moreover, a contract could become unenforceable because laws may change over time based on developing case law and legislative updates. Specific terms and language may need to be added, removed, or revised in order to maintain legal force. These changes are nuanced and tend to be overlooked when using DIY contracts, thereby resulting in an agreement based on laws that are outdated or inconsistent with your business’s jurisdiction. Finally, there is a wide variety of legal rules that describe and dictate the conditions that must exist in order for a contract to be deemed valid and enforceable. Failing to keep conditions regarding enforceability in mind can result in documents that look right but hold no legal weight.
You Could Create an Accidental Legal Obligation. Contract drafting involves very deliberate language. The inclusion or exclusion of various terms can unintentionally create legal obligations and make your business legally liable. This is especially true given the complexity of boilerplate language often found in contract templates. The details hidden within boilerplate language may create obligations that you are not legally required to take on.
These various risks could culminate in increased liability, decreased protection, and expensive legal fees to remedy these mistakes. The limited savings of a DIY contract are easily outweighed by the time and money that will be spent if any of these risks become reality in your business. As the well-known adage goes, “Prevention is better than cure.”