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Five Top Reasons for Not Using Off-the-Internet Form Contracts

Business contracts have important and sometimes expensive legal consequences. Contracts should be taken seriously and be treated as seriously as every other aspect of your business. A good contract can make the difference between a successful business transaction and a financial disaster. It is important to consult an experienced San Diego corporate attorney to give advice and counsel with respect to contracts of any sort. It is very important not to use off-the-internet form contracts. Here are five top reasons why.

Choosing a Template/Form That Does Not Match Your Business Circumstances

Without the advice and counsel of an experienced attorney, you might end up choosing the wrong template. You cannot simply choose a template/form based on the name listed (which is how internet search engines will generate responses). For example, there are significant differences between a residential lease and a commercial lease. Further, in the commercial leasing industry, there are dozens of sub-varieties of commercial property which necessitate specific provisions. If you search for “LEASE,” you could easily end up choosing a form that does not cover your unique needs. Consulting an experienced attorney avoids the danger of using the wrong template.

Not Knowing What Every Provision Means (and What is Missing)

Probably the most significant danger in using off-the-internet form contracts is not knowing what all the provisions mean (and not knowing what is missing). Take a book publishing contract, for example. The off-the-internet form contract might have a provision that reads:

“AUTHOR hereby assigns to PUBLISHER all rights, US and International, for the life of the Copyright, plus all extension thereof, and all rights to any and all derivative works.”

You might understand all the words, but do you understand all of the legal implications? Do you understand the difference between “assigning” rights as opposed to “licensing” rights? What is included in the concept of “all rights?” Does that include the right to make a movie based on your book? What is the legal meaning of the word “derivative works?” Many words that have a commonly understood meaning have a specific legal meaning based on how they are defined in statutes and how they have been defined and refined in case law.

Not Knowing if the Contract Favors You or the Other Contracting Party

Contracts can be written to strongly favor one party or the other. As an example, most standard consumer contracts tend to strongly favor the service provider. As another example, form leases tend to be pro-landlord. In the above book publishing contract example, can you tell if that contract is pro-publisher or pro-author? Obviously, you want a contract that protects your business both financially and legally. Without the advice and counsel of an experienced corporate attorney, you will not know if the particular internet form contract you choose is best for your business or puts your business at a disadvantage.

Missing the Opportunity to be Aggressive With Your Contracts

Aside from not being sure if the internet form contract is advantageous to your business, choosing a form contract may mean that you miss the opportunity to play “hard-ball” with the other side. Sometimes it is useful and beneficial to your business to be aggressive with your contracts. For example, maybe you want to ensure that you can collect attorney’s fees if there is a legal dispute, but you do not want your opponent to have the same contractual right. That is playing “hardball” and sometimes that is the best thing for your business. Internet contracts will not give you those sorts of options.

Not Knowing the Law

While laws in many states are similar, there are legally significant variations from state to state. For example, here in the Golden State, noncompete agreements are not allowed and not enforceable. Noncompete agreements are generally considered “against public policy.” Thus, if you pull off the internet a form template for “Employee Noncompete Agreement,” you would be wasting your time and putting your business at legal and financial risk by asking your employees to sign an unlawful agreement. Just as importantly, there are exceptions and nuances that are often overlooked in form template contracts. In California, there are a couple of exceptions to the ban on noncompete agreements including the situation in which a business is being sold. Noncompete agreements attendant to the sale of a business are “okay” if done properly. An internet form contract might have a notice that such is “not valid in California” but the form is unlikely to detail the exceptions. Retaining a proven California corporate attorney is essential for obtaining the correct information.

Contact San Diego Corporate Law

If you need contract drafting or review services, call Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.