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5 hazards of using contract templates

| Jan 15, 2021 | Firm News |

Contracts are essential to ensuring smooth business operations. They help define the rights and responsibilities of each party and can make each party’s expectations clear. However, a contract is only as good as the information it contains. If you use a pre-printed contract form for every transaction, you could find yourself suffering from a significant legal headache.

In some cases, a contract template may be perfectly suited to your business needs, but you should be aware that dangers can come with using boilerplate language. Remember, a contract is legally binding. You don’t want to find yourself tied to terms that were ill-considered.

1. You might choose the wrong form

When it comes to contract law, language matters. You might wish to enter into a partnership agreement with another business. However, if you sign a template contract that governs joint ventures, the legal consequences and remedies will be much different.

2. Your preferred method of dispute resolution may be overlooked

Most contracts contain an arbitration clause. Businesses prefer to avoid getting tied up in litigation, which may take years to resolve. If you prefer to use arbitration to resolve disputes, the contract’s language must be in line with state and federal law. Simply stating that arbitration is the preferred method of dispute resolution may not be binding.

3. The contract may be too ambiguous

Ambiguous language in a contract can be great for business law attorneys and their billable hours, but it will result in nothing but frustration for everyone else. A template contract may not speak to the specific needs of your business transaction. If you were the one who created the contract, you would likely be held responsible for any legal fallout.

4. Crucial terms may have been omitted

If ambiguity is using a lot of terms that add up to nothing, the opposite is the absence of language governing your transaction. There is no such thing as “one-size-fits-all” when it comes to contracts. Include all of the necessary terms in your document.

5. State laws and regulations can differ

The principles of contract law are relatively universal. However, one state may use terms or language differently than another. You should be sure that your contract meets all required laws and regulations. Failing to do so could result in unintended consequences.

You might not need to hire an attorney to help you draft every single business contract. However, even having a legal professional review a document can help you avoid trouble down the road. Don’t assume that a “canned” form will provide you with the legal protection you need.