For most small business owners, contracts are a necessary evil. You need to have something to protect you, but getting contracts written requires legal expertise and can get expensive. Many small business owners try to rely on templates, but even a template can't cover all the contingencies that different companies can face. To make sure your business is truly protected by the contracts you rely on, you need to create contracts that are specific to how your company does business.
The Problem with Templates
When a new business owner is starting out, it is very tempting to use a template or a standardized contract purchased online. Jeff Bonds, a lawyer with Newton, O'Connor, Turner & Ketchum, PC, points out the flaws in that approach, saying, "First, with standardized online contracts, more often times than not, you usually get less than what you paid for in terms of effectiveness and quality."
Bonds explains, "Generally speaking, courts enforce commitments made in contracts. While a 'standard' downloaded contract may fit one's needs in some respects or have beneficial terms for the business, there may be significant terms which do not fit or that are not beneficial. If those terms are enforced, then the business suffers.Â
"Another problem is that a 'standard' downloaded contract may have terms enforceable in one jurisdiction but not enforceable in another.
"A problem that people do not think about is that the terminology used as well as the applicable law in a jurisdiction can change over time, and therefore a 'standard' downloaded contract written 10 years ago may use language that is no longer commonly used or contain terms that are not allowed due to a change in the law. This can give the impression that your business may not be on top of things or worse, the 'dated' terms may now be unenforceable."
Getting Your Contract in Order
Lawyers specializing in business matters can draft a contract that you can use regularly. Bonds says, "The 'right lawyer' is the one who is excellent in a given area of the law, who the owner/manager communicates easily with, and who can be trusted.Â
"Before using a particular attorney or firm, a person should ask others about the reputation of the attorney or the firm. Also, the attorney that you choose to help you should be one that is skilled and experienced in the area of law to which the contract applies. For example, if you need an employment contract for a future employee, then you should seek an attorney specializing in employment law, not one specializing in mergers and acquisitions."
Also, there can be a variety of differences in laws in different states, making it important to have a local expert. One of the fastest ways to find an attorney can be to ask your network for recommendations.
A Contract Review
Bonds notes that for any contract beyond your standard, it's worthwhile to have it reviewed by a legal expert. "Unless they have a law degree or years of experience, every small business owner, if they are planning on growing a successful business, should seek help from an attorney with any contract they intend to use. When the business owner cannot afford to have an attorney review every contract, the owner should, at a minimum, obtain a review of those contracts which involve large financial commitments or key relationships."
Down the road, you may find that a client or customer has a problem with your standard contract. Bonds recommends getting a lawyer on board immediately. "The attorney may be able to help find a business solution on which both parties to the contract can agree. If not, then the attorney can give the owner/manager an assessment of the situation and guidance through a dispute resolution process. One thing is certain: The problem will not go away on its own. The owner/manager must go through the expensive process to deal with the issue like they would any other obstacle to their business. With this in mind, owners/managers should recognize that they should take active measures before problems arise in order to reduce or eliminate problems in the future. The prevention is ALWAYS cheaper than the cure!"