Often start-ups and small business owners reach for off-the-shelf-contracts and agreements as it saves them time and money. These standard contracts are widely used because they are easy to find and most are free. There’s a misconception that they provide the same protection as a tailored contract. Knowing that each business is unique, this is a risky step from the outset. It may result in financial damage and ruin the reputation of the company. While in some cases downloadable templates (revised by legal professionals) can have some benefits. It is best to have a tailored contract if you want to protect your business.
Reasons you shouldn’t use a standard contract
The disadvantages of using off-the-shelf contracts are many. First and foremost there is a financial risk. If a contract is not drafted to fit the needs of the business, it is open to commercial and legal risk to the business and the way it operates and works with other parties.
Such is the case with numerous businesses that decided to opt for a template contract. In a template contract, the material clauses often do not “reflect the business practices of the party seeking to enforce the contract, leading to costly implications.”
For instance, the High Court forced a supplier to pay a fine of £110,000 to the other party. This was because of unenforcable exclusion clause in the contract. It happened because the clause didn’t reflect the actual sales and contract process of the supplier.
Ultimately, every time you use a contract that is not tailored to your business you are risking not just financial damage but losing the reputation of the company too.
What are the advantages of having a tailored contract?
Having a bespoke contract drawn up to what best fits your business is of paramount importance. You may think hiring a lawyer is costly. But a lawyer will draft a tailored contract which will save you money in the long run. Here are some of the benefits you could expect from investing in tailored contracts:
- They are easy to use. Since they are written exactly for the specific needs of your business or business industry, once you have these tailored contracts you can use them for as long as necessary. A few changes may be needed every now and then to align with the needs of a growing company.
- Better compliance and consumer understanding. Unlike standard contracts, tailored contracts make it easy for a client to better understand the content in front of them. The receiving party can easily identify the relevance the clauses have to the product or service.
- Better understanding of the terms in the contract. Once you have a tailored contract, you will be reusing it multiple times, which means you will become more familiar and understand the terms laid out within. Why is this important? Because if you know the details about every single point in your contract, you will be able to explain it to the other party and show them you are confident in what you bring to the table.
Tailored contracts are written with your business in mind, taking into account things such as copyright ownership, limitation of liability, termination of contract etc.
There are only a handful of contracts and agreements that we would ever recommend using a template for. And even then having a consultation with a lawyer to run through the clauses is always advisable.
Final thoughts
It’s so important to make sure that your contract truly reflects your business processes, the services you offer, your payment terms and the obligations of both parties. Templates will very rarely do this because they are drafted as a “one size fits all”.
That’s why at K&K Legal Consulting we only offer a handful of contracts and agreements as downloadable templates from our website.
However, we also include a consultation within the fee. This means you get an opportunity to explain how your business works so that certain clauses are tailored correctly.
This way, you can be confident that the template will indeed reflect your business practices and support you in the way it should and also protect you in the event of a dispute.