Danger of Using Contract Templates

Can’t I Simply Alter an Already Existing Contract?

People should usually avoid free contract templates found online, and should be very cautious  when using another business’ contracts.  Initially it’s a tempting decision because it saves you the initial cost of paying for an attorney, but the results can actually be more costly later.  If one insists on using a free contract template they found online, they should at least have an attorney review it to understand the potential pitfalls they may face.

Examples of Poorly Drafted Contracts

Here are a few horror stories we’ve seen as we have litigated contractual issues:

• One business owner found a non-compete agreement online, changed a few of the clauses in the contract, and had his employees sign it. When his employee quit and wanted to violate the non-compete agreement, the business owner soon learned that the con-compete agreement he used contained several clauses that were not valid under Utah law.  It became clear this non-compete agreement was written for a business owner in another state.
• One entrepreneur, an MBA graduate, was confident he had the education and ability to draft contracts without the help of an attorney. This entrepreneur had drafted many contracts before and was never sued, and did not have the occasion to sue anyone else, so his contracts were never put to the test.  He drafted a contract for the sale of a business, but the deal fell apart.  He sued the individual on the other end of the contract.  It quickly became apparent that he neglected to define certain terms in the contract, he didn’t write certain conditions into the contract, and therefore had to drop the lawsuit and lost thousands of dollars in investments.
• A group of three individuals started a new company. In an effort to save money, and for convenience, one of the three owners drafted a contract for the purchase of some property.    Six years later the owners returned to the seller because he had neglected to sign over his interest in a certain portion of the property.  Upon review of the contract, there was no provision that specifically required the seller to provide his interest in this certain portion of the property, even though there should have been.  The owners found it was going to be cheaper to renegotiate with the seller and pay him several thousand more dollars for the property rather than hire attorneys to sue him for what they felt was rightfully theirs.
• Three individuals found bylaws (rules that govern a company’s/corporation’s operation) used by another company; they altered these bylaws and adopted them for their own, new company. Almost ten years later one of the initial founders wanted to sell his shares of the company, but the three realized they hadn’t put any provisions in the bylaws for how this sale should take place, or who these shares could be sold to.  Each of the owners ended up hiring their own attorneys and each spent thousands of dollars before finally settling the issue.

Litigating business issues can cost tens of thousands of dollars.  The money you can save by hiring an attorney to draft or review a contract before signing can protect you, your assets, your peace of mind, and your business.  If you would like one of our experienced business law attorneys to draft or review your contract, please call our office to schedule an appointment.