Using DIY Contracts: A Money-Saving Tool or Dangerous Trap for Entrepreneurs?

Entrepreneurs are typically by their nature enterprising, quick-thinking, and resourceful. These attributes serve them well because they wear many hats when starting a business.  Sometimes business founders find themselves in the roles of CEO, secretary, accountant, and even general counsel all in the same day. I am well acquainted with the realities of limited startup budgets, and that paying for any form of outside assistance can seem like an unaffordable luxury. As a result, many aspects of a new business are handled by the entrepreneur using the “Do-It-Yourself” approach. Often this approach does not lead to a negative effect or outcome.
When it comes to legal documents, however, the DIY approach in the long run sometimes ends up being the most expensive one. Why? Because overlooking or misunderstanding a contract term might have dire financial consequences.  Written contracts contain the terms of the relationship that you are going to have with another business or another person. Getting them right from the beginning is important. Careless errors – even something as seemingly inconsequential as misusing capitalized terms – can have significant unintended consequences.
At the risk of coming across as self-serving, it is worth seeking the counsel of a skilled attorney who understands your needs and requirements each time you enter into a contract.
Having an expert assist in the drafting, review and revision of your documents is a wise investment for at least three important reasons:

  1. Choice of Language

One of the most valuable things a skilled attorney can do for you in drafting or revising a contract is to select the exact words and phrases to accomplish your goals and protect your interests. Entering into a contract without an attorney’s help may result in you unknowingly agreeing to undesirable terms, and often they don’t reveal themselves as a problem until you’re far into the contract’s term. At that point, you are stuck either complying with them, trying to avoid complying, (if possible) terminating the agreement, or becoming involved in expensive and distracting litigation. Accordingly, contract review and analysis by an expert is an essential risk assessment function.
A skilled practitioner knows what terms are and are not appropriate for various types of contracts. Legal documents often use terms that, while defined within the contract, are not readily understandable from their context or usage. The contract drafting style I have developed over the years eliminates when possible any unnecessary “legalese” or terms that appear solely because they are a holdover from decades (or sometimes centuries) of use.  However, in some cases, the use of complicated and specialized terminology cannot be avoided. A skilled document artisan should be able to clarify your rights and responsibilities and align them with your intent by making sure each and every word is appropriate for your situation.  This leads me to my next point.

  1. Each Situation is Unique

One of the biggest misunderstandings among businesspeople (and sadly, even some lawyers) is that contract drafting amounts to filling in blanks in a form. I can’t fault anyone who subscribes to this misconception. There are thousands of contract forms out there on the Internet and DIY legal websites have sprung up and become stunningly popular. Also, whether a contract is five or ninety-five pages, there are frequently sections of language that are (or at least appear to be) consistent from one document to the next. I commonly get requests from clients for a “boilerplate” or “standard” or “simple” or (my favorite) “one-page” contract. I cannot emphasize strongly enough that this is not and should not be the approach to proper contract drafting.
Do I have contracts that I use as a starting point? Absolutely. Do I word certain provisions exactly the same from one contract to the next? Definitely. I even prepare form contracts for clients to use over and over when appropriate. But those are situations where I developed the form for the client’s unique circumstances, and in those forms I structure the document in a way that can accommodate variations each time it is used, and we calendar an annual review of the form to see if changes are needed.  Even what are seemingly the simplest and most routine and often copied legal contracts should be tailored to each unique situation. Approach contracts any other way at your peril.

  1. Your Lawyer is Your Advocate

The lawyer who drafts, reviews and revises your contracts is obligated by the client-lawyer relationship to put your interests above all others. His or her obligation is to strive for the best outcome for you, the client.
In providing contract counsel the lawyer’s role can vary. Lawyers can help you choose the right type of agreement for your situation, understand what your rights and obligations are, negotiate to have the terms you want included and unacceptable provisions removed or renegotiated, and come up with creative solutions when your reach an impasse.  
As a do-it-all entrepreneur, trying to save valuable dollars by handling your contracts yourself is understandable, but can be a costly mistake in the long run. The sound approach is to have contracts prepared and/or reviewed by counsel before entering into any new business relationship. Some of the most difficult moments in my professional life have involved counseling clients through contract mistakes. Hopefully, some of this information can help you avoid situations like that in the future.

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