We live in a DIY society. The incredible success of Pinterest® is based on this DIY mindset. In addition, there is a plethora of legal advice and information online these days. Because of this, even the smartest of people—actually, mainly the smartest of people—decide they don’t need to hire an attorney to write contracts for them. If you are one of these smart people, you probably think you can DIY legal matters such as starting your business, hiring an independent contractor, forming a joint venture, licensing the cool new app you developed, or transacting a multitude of other business arrangements simply by using Google® or going to LegalZoom® to find fill-in-the-blank forms.
These forms are typically legally sound. The companies that provide these forms are reputable and well known in the community. So, why shouldn’t you use these forms to enter into business arrangements with others?
Here are 10 good reasons:
1. Contract law is based on state law. You may find an agreement that seems absolutely perfect for your situation. There is only one little tweak you think you need to make—change the jurisdiction to your state—and, voila, you have the contract you need. Not so fast! Since contract law is state law, you may have just rendered many of the provisions of this previously legally valid contract into provisions that are no longer enforceable.
2. You don’t necessarily know what kind of contract you need. Contracts sometimes have names that are not intuitive to a non-lawyer. And, sometimes non-lawyers use contract names interchangeably when they aren’t really interchangeable. For example, if you are forming a corporation, you typically need two agreements: an Articles of Incorporation and Corporate Bylaws. In contrast, if you are forming an LLC, you typically need an Operating Agreement. If you are attempting to form a corporation but use an Operating Agreement form instead of a Corporate Bylaws form, you are making a serious mistake. The provisions contained in these two agreements are vastly different. If you consult with an attorney, she will ask you the problem you are trying to solve (not what kind of agreement you want her to draft) and she will determine the agreements you will need for a successful transaction.
3. You may not understand the terms you are agreeing to. Formal legalese is becoming a thing of the past and most contracts written in the United States today are written in a more conversational tone. Having said that, there are still words that have specific meanings in a legal context and these meanings may not directly correspond with the definitions in the dictionary. In addition, there are certain words that are required in specific provisions for them to be enforceable. If you aren’t an attorney, you probably don’t realize the implications of particular words or why some words are in all caps. Understanding the terms of a contract can be difficult even for the smartest of non-lawyers because of the legal lexicon and writing conventions.
4. Form contracts are the lowest common denominator. The person who wrote the contract you find online is not familiar with your particular situation and the same form is designed to be used for business transactions in the most general way. The same form may be used by hairdressers, software engineers, and landscapers. What this means is the forms cannot contain a great degree of detail because there is no way the contract writer knows your line of business or the specifics of your transaction. For this reason, they write contracts very generically (i.e., the contracts are the lowest common denominator). They are designed to be used by all and therefore do not capture the intricacies of your particular business or transaction. These contracts are likely to leave out provisions that are vitally important to your deal.
5. You don’t know what provisions you may need to modify, add, or delete. As discussed in Number 4, a form contract is likely to be very generic and you probably need to add provisions to customize it to your specific needs. However, you probably don’t what those provisions are. If you use Google® and find someone else’s contract you want to copy, it may contain provisions that need to be modified or that don’t apply to your transaction at all but it is unlikely you will be able to recognize what those provisions are.
6. You don’t have the expertise to add or modify provisions. Even if you do recognize that you need to add or modify the provisions discussed in Number 5, you probably don’t know how the additions or modifications should be written to do what you want them to do. As discussed before, there are situations where certain words should be used to convey specific legal meaning. If you delete those words or don’t use those specific words, your provision may not be enforceable or may not carry the same legal authority. In addition, different laws apply depending upon whether you are selling a product or a service. You need an attorney to make sure you have the correct verbiage to protect you and to make your contract enforceable.
7. Even if you can talk to an online attorney, that attorney probably doesn’t have expertise and experience in your field. Some sites that provide legal forms also give you access to their staff attorneys. I’m sure these attorneys are qualified and are good at handling general questions but they aren’t going to be able to help you with provisions that are specific to your field. For example, if you want to include on-prem licensing in your software agreement, you need to consult with a technology attorney because she will have the experience and knowledge to make sure the proper provisions are included.
8. You don’t have help with negotiations. Assuming you have found the perfect contract form and everything is legally sound, the other party may still want to negotiate terms with you. The other party may ask you to modify provisions that don’t make sense from a legal perspective. Without an attorney to assist you, you won’t know whether the requested change is in your best interest or whether it will be enforceable.
9. You don’t develop a relationship with an attorney. An important part of hiring an attorney is the relationship you develop. When an attorney starts working on your contract, the worry transfers from you to her. Now it is her job to worry about whether everything is properly memorialized and whether you are protected. Your time is better spent concentrating on the things you excel at to make your business successful.
10. Most importantly, you can lose a lot of money! There is an old saying: “Don’t be penny wise but pound foolish.” What this basically means is that you shouldn’t cut corners to save a few pennies right now that can potentially cost you many pounds (dollars) in the future. In other words, spending a few hundred (or even thousand) dollars more to hire an attorney to advise you of the kinds of legal agreement you need for a situation, advise you of the risks and pitfalls, and to draft a customized contract to suit your specific circumstances can potentially save you thousands or tens of thousands of dollars in the future when a dispute develops over the contract.
There are many things you can DIY—building a fence, painting your house, creating wedding centerpieces, etc.—but the legalities of transacting business should not be one of those things. A contract is a legal agreement designed to protect the best interests of the parties involved. It doesn’t matter how smart you are. The only way you can know if your contract will serve you well is with the help of a licensed attorney.
If you need a contract drafted or to have a contract reviewed by a "real live attorney", please contact me to schedule a conversation about how I can help you.