January 27, 2017
I’ve seen an increasing number of “DIY” contracts come across my desk lately. I don’t know if it’s because of the increasing regulations surrounding small businesses, or if folks are finally starting to realize the importance of contractual agreements. And while having some form of written agreement in place is usually better than having nothing (note: use of the term “usually”), Franken-contracts pieced together over the years can create a huge headache. Here are a few reasons I always recommend clients don’t use “found-it-on-the-internet” or “got-it-from-a-friend” contracts:
Often, people want to “send me a contract” they found so I don’t have to draft one “from scratch.” However, this often takes longer than starting fresh. When you send us a piecemeal agreement you’ve gotten off the internet/ from a colleague/ edited bit by bit as issues arise, we have no idea what is in that document. It might be a great contract! However, we still have to go through, clause by clause, and dissect it. It’s not just proofreading; we have to make sure clauses “play well together.” I tend to visually map out the sections to make sure clauses don’t conflict or cancel each other out (discussed below).
It is almost guaranteed that any practicing attorney has a stash of shell agreements that we’ve drafted and redrafted to cover our client’s needs. We know exactly what is in that agreement, how the sections work together, and where we need to edit and add in clauses to protect your business to the fullest extent possible. I can practically recite my photographer’s agreement by heart at this point. I’ll be able to get in, change a few things, and get out in much less time than with a document requiring a total overhaul.
In addition to our Federal laws, each state has its own set of laws and judicial interpretations applicable within its borders. This means that what is contractually enforceable in one state may not be enforceable in another. Some states recognize certain judicial interpretations, others may ignore them entirely. And guess what? State laws are always changing!
In fact, the inclusion of certain clauses can completely invalidate an agreement in certain states that refuse to “blue pencil” (a term that means “go through and modify the document comply with the laws”)—Virginia being one of them. Which brings me to….
That’s right folks. Your agreement might cancel itself out.
It can do this in one of two ways:
You know how you sometimes sign things that you really don’t understand? For example, the waiver at the trampoline park, the fine print on a credit card application, or a lease for an apartment? That can’t happen when you run a business. You MUST know what you’re signing, and what you’re asking clients to sign. Not knowing is like throwing a bunch of ingredients together, cooking them for an unspecified amount of time, and forcing people to eat the mess that comes out of the oven. It’s a bad idea!
For example, if you’re a service-based business providing a long-term deliverable, (shout out to all my wedding planners, photographers, and designers) you may have a payment structure that doesn’t ensure you get paid in the event of a cancellation. We would draft your contracts to provide for incremental liquidated damages to compensate you for all the time you spend over a period of months or years, instead of an 50/50 payment structure. Another example is an arbitration clause. For small businesses, arbitration can be even more expensive than just filing a warrant in debt in court. Arbitration, with its rules and procedures, can be even more expensive than simple litigation! Unless you’re in a place where arbitration makes sense, we’re going to draft alternative methods to deal with conflict.
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