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The Dangers of Free Online Contracts

The Dangers of Free Online Contracts

Often businesses use free online contracts for partnership agreements, employees, consultants, vendors, etc. Since these are such important relationships, you need to be confident those contracts indeed benefit and safeguard you and your business.

Your need for contracts can arise in myriad circumstances. With the growing demand for your service or products, you may need to expand your team. This necessitates employment and independent contractor agreements. If you’re offering a service, you have clients and you need to have a client service agreement to avoid problems. Same goes for products, if you’re selling products you need Terms and Conditions, a Privacy Policy, and a Refund and Exchange Policy.

The purpose of written contracts with partners, shareholders, employees, contractors, suppliers, vendors, and customers is to:

  • Solidify your relationships with these parties,
  • Clearly delineate each party’s rights and responsibilities,
  • Avoid liability
  • Avoid payment disputes or non-payments by clients and customers
  • Avoid future disagreements in general, and
  • Preemptively agree on how to handle disagreements.

Your contracts can only do their job if they accurately reflect your situation and intentions. If you use a free contract template that you found online or got from a friend or another business to save money, you end up in agreements that may not fulfill their purpose or worse, harm you because you have clauses you don’t fully understand that the other party can take advantage of, placing your business at risk for costly disputes. You may save money now only to be forced to spend a lot more later.

Questions to Ask Yourself Before Downloading a Free Contract

Let’s say your startup is expanding and you want to improve your organic and social search traffic. You hire an SEO strategy consultant because you want more people to find you online. You now need an independent contractor agreement, and your first thought is to pull one from the internet.

There is no shortage of free or low-cost independent contractor agreements online. However, broad issues with free contracts can be summed up with these questions:

Do you know how each provision affects both parties?

Many online business contract templates are full of legalese and terms of art. You may see terms like “represents,” “warrants,” “indemnify,” “joint and several liability,” “damages,” “caveat emptor,” “de facto,” and the list can go on. If you lack experience with legal jargon, then there are times when you may make the best guess as to what certain provisions mean. If you cannot confidently state that you know how each provision impacts your business, your consultant, and your business relationship, then you need to speak with an attorney before signing.

Do you know if each provision is enforceable?

There are many nuanced restrictions to what you can agree to in a contract. A good example is an arbitration provision. Many online contracts include a boilerplate mandatory arbitration clause. This typically requires parties to submit a dispute to arbitration instead of immediately filing a lawsuit. There’s nothing inherently wrong with an arbitration provision, but you may not want to be at the mercy of someone else to make one final decision on who wins the case and the amount. You may want to be able to appeal the decision and request much more in damages though litigation.

There is also the question of whether the arbitration provision in your contract enforceable in your state or chosen venue? If you aren’t sure, then the arbitration provision in your free contract template can do you more harm than good. If your relationship with your consultant goes south, you could find yourself in costly litigation regarding whether the other party must abide by that provision or not.

Do you know what you’re missing?

You obtain an independent contractor agreement from the internet, read it over, and everything makes sense. There is a provision that makes it clear the person is an independent contractor and not an employee. There is a clause regarding your ownership of the work product. There is a place to insert duration and payment terms.

Everything looks ready to go, but do you know if the agreement is missing something essential? Is there a clause you should have in the agreement that is not there? Is there a part of a provision that should be clarified or expanded?

One of the dangers of using online contracts is that you don’t know when something isn’t there that should be and how that could hurt you in the future.

Benefit From Legal & Business Experience

If you answer one or more of these questions with a “no,” then it is best to work with an experienced attorney to negotiate and draft your contracts. Whether you’re a startup or a small to mid-size company, you need to protect the business as much as you can. By working with an attorney experienced with contract drafting, review, and negotiation instead of utilizing free contract templates, you obtain a clear understanding of how an agreement impacts your business, how the contract mitigates the risk of disputes, and how it controls the resolution of a potential dispute.

We are not your average law firm. Think of us as the next step in your company’s growth.  When you work with Gouchev Law, you can expect innovative solutions, adept business guidance, and aggressive advocacy to help you achieve your goals and protect you from risks. At Gouchev Law, we help companies of all sizes. Schedule a free strategy session today to see what Gouchev Law can do for your business.

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