Helping out fellow entrepreneurs by sharing advice on best practices, walking through a customer service issue, providing guidance on social media etiquette and commiserating on the ups and downs of owning a small business are something that entrepreneurs do every day. It is important to share experiences, thoughts and advice. But sharing business contracts so that a fellow entrepreneur can use it for their own business can be much more detrimental to your business than it is helpful.
Although contracts may not be at the top of your list of fun things to do for your business, they are something that every business needs to protect their business. In order to cut down or eliminate legal costs, small business owners may consider using a fellow business owner’s contract for their own. In theory it makes sense – the contract is already in use, the other business owner’s clients have signed it and the other entrepreneur is still in business. What could go wrong? Unfortunately, a lot. As a lawyer who works extensively with contracts, I feel like it’s my job to rain on your parade and let you in on 5 reasons why you should not copy another entrepreneur’s business contract to use in your own business.
1. You do not know who wrote the contract. Anyone can post anything on the internet. Did the other business owner pull parts of their contract from a google search? Did they get it from another entrepreneur? Did they get it from a free contract template site? If the answer to any of these questions is yes, you need to RUN from this contract. The person who drafted the contract may have nothing more than a degree in watching old episodes of Ally McBeal. There are certain legal provisions that should be in every contract. If you do not know who wrote the contract that you borrowed, how do you know that the required provisions are in your contract? It makes more sense to hire a lawyer who has extensive experience and education to draft your contract for you so that you get it right from the start.
This leads to another scenario – using a business contract that has been drafted by a lawyer for another business owner. This obviously adds an element of protection as it has been created by a lawyer. The drawback however, is that it was created specifically for that client, not you. You do not know what instructions the client gave to the lawyer, what specifics they wanted inserted into the contract or (perhaps more importantly) deleted from the contract. Where a business owner hires a lawyer to draft a contract, the resulting contract is a customized piece of work that is not a one size fits all scenario.
Hiring a lawyer to create a custom contract may not be in your budget. That is why I have drafted contract templates that you can DIY yourself to customize for your business. You can check out the list of contracts that I sell online here.
2. You do not know the jurisdiction of the contract. Laws differ between countries, provinces and even cities. If the contract you copied is governed by the law of another jurisdiction, it obviously does not contemplate the complexities of your location. The only way to ensure that your contract is drafted according to local laws is to have a lawyer licensed in the jurisdiction draft one for you.
3. You do not know what the contract says. If you are borrowing a contract and simply copying it, do you actually know what it says? Although the contract may be written in English, there are complexities in legal language that do not always result in clear contracts (hello “witnesseth”, “indemnification” and “ad idem”). Imagine trying to explain a section of your contract to a potential client and you don’t even understand it. That’s not a great way to represent yourself as a trusted business owner. If you do not understand a provision in the contract, do not use it for your business until you find out what it means. Lawyers can help you to understand the provisions and can even draft them in a way that uses more simplified language (although there are some legal terms that should remain in every contract).
4. You do not know when the contract was drafted. I have had contracts come across my desk that have been used since the 1980s. Think of how much has changed since then! Could you imagine having a photography contract that did not contemplate how images could be shared online? Contracts need to be up to date not only to reflect changes in technology but also changes in law.
5. You do not know the industry for which the contract was drafted. If the borrowed contract is not from your industry, there may be information in the contract that is not relevant to your business. For example, photographers often have clauses in their contracts setting out provisions protecting their equipment and digital images. If a business coach copies a photographer’s contract, these provisions are not relevant in the coaching industry. Of course these provisions can easily be deleted from a contract, but have you considered what is unique to your industry and needs to be added? A borrowed template from another industry would be silent on the intricacies of your industry. And if the contract is silent on an issue, you would have an uphill battle trying to enforce a silent provision.
Copying someone else’s business contract to use for your own business is never a good idea. There are too many questions and not enough answers. Your business is your livelihood; don’t leave it open to risk. To find out how I can help draft your contracts, please drop me a line here.
Do you use contracts in your business? Why or why not? Let me know in the comments.