DUBIOUS AND INAPPROPRIATE ONLINE FREE TEMPLATES CAN RISK YOUR BUSINESS

Young businesses may, in an attempt to cut legal, spend, rely on free online template to as their base document for contracting. Whilst the idea of cutting costs certainly tickles one’s ears, relying too heavily on dubious or inappropriate online free templates could ironically result in larger costs. It may be prudent to engage a lawyer to draft the contracts that you need instead.

Before addressing why, you should have a lawyer draft a contract for you, it would be helpful to discuss contracts generally. Quite simply, a contract is a promise, or set of promises, which the law will enforce.

There is no requirement that contracts be in writing. People are often surprised to hear that oral contracts are just as enforceable as written ones. For example, if your neighbor told you he would pay you 500 Rs. to mow his lawn, and you[i] then mow his lawn, that would make a valid contract. If your neighbor then refuses to pay you, he would be breaching his promise to pay you 500 Rs.

However, it is often best to get an agreement in writing simply because it is much more difficult, and costly, to prove the existence and terms of a verbal contract than it is a written one. In the above example, if you had to go to court to get the 500 Rs, your neighbor could say he offered 50 Rs not 500 Rs. or he could conveniently deny saying that he would pay at all.

The contract is a legal document. The two sides are making a legally binding agreement in which the law will be enforceable. There are legal consequences for the side that fails to keep its promises. The contract must not only memorialize the agreement, but it must be written in a way that makes the agreement enforceable in court.

That is the reason that a well drafted contract is very important for your business. Understand it more by following points;

THE IMPORTANCE OF WELL-DRAFTED CONTRACTS FOR YOUR BUSINESS

Everyone knows the value of a contract. It enables parties to come to mutually beneficial agreements which facilitate innovation, creativity, and business expansion. But drafting a contract is easier said than done. A layperson could draft something that looks like a contract, but is woefully inadequate. It may even contain provisions that are not enforceable. A poorly drafted contract creates ambiguity, confusion, and misunderstandings that can derail business and other deals.

To write an effective contract, you need to understand that it must accomplish several different things. The contract must protect your interests so that if there are any issues later, you have the law on your side. The contract must accurately describe not only the deal but also what each side is exactly promising to do. At the same time, the contract must be written in a way that the other side will be comfortable signing it and moving forward with business. Contracts that are completely lopsided and unfair can be challenged in court.

Almost every relationship between your company and others – and among entities within your company – should have a contract. Most people realize this, but they either don’t reduce agreements to contracts or they attempt to draft their own. Without an understanding of Indian contract law, either of these is risky.

The objective of entering into a contract is to clarify the parties’ obligations while providing them with legal protections. To do that, you need a contract that is customized for the exact needs and nature of your business. A good contract makes litigation less likely by providing enforceable rights and remedies upon breach.

CAN I DRAFT MY OWN CONTRACT?

It’s possible to draft your own contract. However, you should hire contract lawyers to draft your contracts for the same reason most people don’t fix their own cars. They will take on the liability of avoid legal mistakes while ensuring that your agreements are valid and enforceable.

WHY HAVE A LAWYER DRAFT A CONTRACT?

Having a lawyer draft your contracts gives you following distinct advantages:

Lawyers give you an invaluable outside perspective on the terms of the deal. In addition to their legal skills, contract lawyers are also detailed oriented and excellent problem solvers. Having a lawyer prepare your legal documents gives you an outside perspective on your business dealings. Sometimes the people involved are too close to the negotiations to notice potential problems with the structure of the deal.

Lawyers make sure the end product is a legally enforceable agreement. Contract lawyers have a specialized knowledge. They have seen firsthand why the exact language used in a contract matters. It might seem silly but something as minor as the placement, or misplacement, of a coma can make alter the way a particular clause in the contract might be interpreted by a court. When there are only two sides in a deal and things go south, there can only be one winner and one loser.

When you hire a contract lawyer to draft a legal document you are getting the expertise of someone who understands how the courts will interpret and enforce the different terms of a contract. Having a lawyer draft your contracts is the best way to make sure that a court will view your contract the same way you do. Contract lawyers add stability and predictability to financial and personal agreements.

When it comes to contracts, “close enough” is not good enough. The contract must be precise if it is to give you the maximum protection of the law. Because a contract has several technical legal requirements, if your written document leaves out a single key element, you will be left with something that describes the intentions of the parties, but is not legally enforceable. It leaves you unprotected in the event the other side fails to make good on their promises.

DANGER OF USING FREE ONLINE TEMPLATES?

There are many dangers that come from writing your own contracts without the input of a contract lawyer;

One of the functions of a contract is to prevent future disputes between the two sides. This requires that the contract use precise language to describe the duties and responsibilities of both parties. When people create their own contracts, they often do not realize how vague their language is. For example, one common contractual term is “timely.” If timely is not defined in the contract, this one word can lead to expensive litigation. One side may feel that a delivery within 30 days is “timely” while the other side may face economic ruin because it understood “timely” to mean within a week. This vague term could land the two parties in court facing an uncertain outcome.

Another danger of DIY contracts is that they almost always fail to adequately address a number of potential issues that might come up, particularly in the event things do not go according to plan. Most people and businesses write contracts as if nothing will ever go wrong between the two parties because the deal is too important. Contract lawyers have seen enough deals go bad that they draft contracts to address common issues in commercial relationships.

When something bad happens down the road and the parties have not addressed it in their contract, one side usually gets it in the bum.

Another commonly seen issue with self-drafted contracts is that they may not be enforceable at all. Additionally, they may contain provisions that are enforceable in one state, but not enforceable in others. A contract lawyer will ensure that all of the essential elements for an enforceable agreement are present in the document.

These online contracts are boilerplate forms, which may not have been drafted with INDIA in mind. A lawyer who has never even practiced contract law in INDIA may have created the template you are thinking about downloading. This is a problem because not all countries/states have the same rules and laws when it comes to interpreting different contractual terms.

Another issue is that these templates do not take into account the specifics of your situation. No two people or businesses are exactly alike. If you are using a form contract, you may find yourself in serious trouble when a contract dispute arises. It is during contract disputes and resulting litigation over form contracts that people and businesses learn that it is much more expensive to edit a form contract than it is to have one drafted correctly in the first place.

Nor are these contracts tailored in any meaningful way to the specifics of your agreement. Instead, they usually spout a bunch of flowery legal gibberish that older attorneys or lay people think are significant. The modern trend in all legal writing, including contracts, is to write in plain, clear, and easily understood terms.

It is completely understandable that many people and businesses want to save money on legal costs and succumb to the temptation to grab a few form contracts off Google. However, the cost to hire an attorney, who properly prepare a contract is likely surprisingly cheaper than you might think. Moreover, the cost to litigate a contract dispute over poorly worded clauses will certainly cost much more than having a professional write the contract in the first place.

When you hire an attorney to draft a contract you are getting a custom document that was drafted specifically for your situation and to protect your specific interests.

CONTRACT DRAFTING AND LEGAL DOCUMENT PREPRATION

If something is important enough to create a contract, you should invest in making sure the contract itself actually protects your interests. Experienced contract lawyers understand that when drafting a contract for their clients, they must create a legal document that serves both the business and legal needs of the person or company.

A legal firm has written thousands of legally binding contracts, in plain language, for a variety of personal and business situations. They use their extensive contract law experience to draft contracts that serve the purposes of your business, seek to avoid disputes, and in the event litigation becomes necessary, will be enforceable in court.

Often businesses use free online contracts for partnership agreements, employees, consultants, vendors, etc. Since these are such important relationships, you need to be confident those contracts indeed benefit and safeguard you and your business.

NEED & PURPOSE OF CONTRACTS

Your need for contracts can arise in several circumstances. With the growing demand for your service or products, you may need to expand your team. This necessitates employment and independent contractor agreements. If you’re offering a service, you have clients and you need to have a client service agreement to avoid problems. Same goes for products, if you’re selling products you need Terms and Conditions, a Privacy Policy, and a Refund and Exchange Policy.

The purpose of written contracts with partners, shareholders, employees, contractors, suppliers, vendors, and customers is to:

Solidify your relationships with these parties,
Clearly describe each party’s rights and responsibilities,
Avoid liability
Avoid payment disputes or non-payments by clients and customers
Avoid future disagreements in general, and Preemptively agree on how to handle disagreements.

Your contracts can only do their job if they accurately reflect your situation and intentions. If you use a free contract template that you found online or got from a friend or another business to save money, you end up in agreements that may not fulfill their purpose or worse, harm you because you have clauses you don’t fully understand that the other party can take advantage of, placing your business at risk for costly disputes. You may save money now only to be forced to spend a lot more later.

QUESTION TO ASK YOURSELF BEFORE DOWNLOADING A FREE CONTRACT

Let’s say your startup is expanding and you want to improve your organic and social search traffic. You hire an SEO strategy consultant because you want more people to find you online. You now need an independent contractor agreement, and your first thought is to pull one from the internet, seriously!!!!

There is no shortage of free or low-cost independent contractor agreements online. However, broad issues with free contracts can be summed up with these questions:

Do you know how each provision affects both parties?

Many online business contract templates are full of gibberish in terms of art. You may see terms like “represents,” “warrants,” “indemnify,” “joint and several liabilities,” “damages,” “caveat emptor,” “de facto,” and the list can go on. If you lack experience with legal jargon, then there are times when you may not make the best guess as to what certain provisions mean. If you cannot understand how each provision impacts your business, your consultant, and your business relationship, then you need to speak with an attorney before signing.

Do you know if each provision is enforceable?

There are many restrictions to what you can agree to in a contract. A good example is an arbitration provision. Many online contracts include a boilerplate mandatory arbitration clause. This typically requires parties to submit a dispute to arbitration instead of immediately filing a lawsuit. There’s nothing inherently wrong with an arbitration provision, but you may not want to be at the mercy of someone else to make one final decision on who wins the case and the amount. You may want to be able to appeal the decision and request much more in damages though litigation.

There is also the question of whether the arbitration provision in your contract enforceable in your state or chosen venue? If you aren’t sure, then the arbitration provision in your free contract template can do you more harm than good. If your relationship with your consultant goes south, you could find yourself in costly litigation regarding whether the other party must abide by that provision or not.

Do you know what you’re missing?

You obtain an independent contractor agreement from the internet, read it over, and everything makes sense. There is a provision that makes it clear the person is an independent contractor and not an employee. There is a clause regarding your ownership of the work product. There is a place to insert duration and payment terms.

Everything looks ready to go, but do you know if the agreement is missing something essential? Is there a clause you should have in the agreement that is not there? Is there a part of a provision that should be clarified or expanded? One of the dangers of using online contracts is that you don’t know when something isn’t there that should be and how that could hurt you in the future.

BENEFIT FROM A LEGAL FIRM

If you answer one or more of these questions with a “no,” then it is best to work with an experienced attorney to negotiate and draft your contracts. Whether you’re a startup or a small to mid-size company, you need to protect the business as much as you can. By working with an attorney experienced with contract drafting, review, and negotiation instead of utilizing free contract templates, you obtain a clear understanding of how an agreement impacts your business, how the contract mitigates the risk of disputes, and how it controls the resolution of a potential disputes.