A client recently called in a panic. She had used an online template to create a contract to present to what she hoped would become a major new client and that client’s legal counsel had come back with plenty of red ink and questions about the draft. After acknowledging that it hadn’t occurred to her that she might be required to amend and explain the copied contract, she readily agreed with me that DIY is great sometimes, but it can often leave you with a flooded bathroom.
While working on her response so she didn’t lose this new client, I thought about how often I’ve seen people advise other entrepreneurs- “You don’t need a lawyer to do that; you can do that yourself!” and how short-sighted that advice is.
It will come as no surprise that I’m not a fan of using online templates and attempting to DIY your contracts or other legal documents without any legal advice and here’s why:
1.Templates are not Tailored to Your Specific Situation
By their very nature, online templates are generic. By copying and pasting from the internet without understanding what the clauses really mean and without understanding what’s necessary in your particular situation, you risk having a piece of paper which gives you a false sense of security but doesn’t protect you from potential liabilities which are obvious to a trained eye.
One example from real life- you take a generic agreement which contains a non-solicitation clause preventing your client from trying to lure away your employees. But what you really want is for your client not to work or lure away other clients because if they work together, their finished product will compete with yours. This actually happened recently and the person who used that generic agreement lost a lot of his business when his clients decided they would rather work together than with him.
2. Contracts aren’t static
As in the case of my client above, it’s often the case that when you present a draft contract for signature, the other party will have some questions or want some changes. If all you’ve done is picked a template from the internet, you won’t know what changes you can safely say yes to or how to word those changes to fit into your template. Especially when you’re dealing with a bigger client who has its own legal counsel, you don’t want to appear to be an amateur who has presented a contract that you really don’t understand.
3. You don’t know what you don’t know
With an online template, you could be leaving money and opportunities on the table; obligating yourself to something unnecessary or missing important clauses peculiar to your industry. You may even choose the wrong template altogether. Frequently, individuals execute a joint venture agreement when really, they have a general partnership. A common mistake is to sign a lease when you really mean to grant a license.
Also, because you don’t know when the template was drafted, you don’t know whether there’s been an important change in the case law or legislation which isn’t reflected in your template and could affect your legal rights or make the whole thing meaningless. For example, did you know that those clauses that try to exclude all liability on the part of the service provider don’t hold up in court unless you have taken very specific steps to bring the exclusion to the attention of your client and your client has had to signal their acceptance of that particular clause?
In an ideal world, you would get a lawyer to draft the contracts for all the key relationships in your business; it as investment in your protection that can save you thousands. When you’re starting up and budget is more of a concern, at the very least have your DIY contract reviewed by a lawyer because what you don’t know can (and often does) hurt you.
If you’re fed up with trying to DIY the legal side of your business, apply to be part of our annual retainer program for entrepreneurs and never have to worry about running your business naked again. To learn more and to apply, click here.