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Using Standard Form Contracts May Hurt Your Business

Posted by Corey F. Schechter | Nov 15, 2016 | 1 Comment

When putting together a contract for the first time, many business owners may turn to standard form contracts to make agreements between customers, vendors, and other businesses. Calling these contracts “standard” may make it seem like they will protect your interests and provide for any contingencies that arise. However, many businesses find that a standard form contract ends up hurting their business.

A one-size-fits-all contract may not actually fit any individual business. In trying to cover all bases, a form contract may avoid language that is specific to your type of business. Form contracts may also include unnecessary terms and conditions that would never apply to your company. Not only do these vague business contracts fail to address important issues that may arise between the two parties, they may also lead to confusion over what terms will actually govern the agreement.

Laws and regulations change over time. A recent court decision may render a certain contract condition unenforceable. Without making updates to your contracts, you may later find that your contracts are unenforceable, leaving your business without legal protections.

California's laws make it a unique state to operate a business. Many standard form contracts do not take into account state or local laws and regulations. A number of San Diego businesses that use standard form contracts may find that contract provisions are not appropriate for California or San Diego-specific laws. In some cases, the contract language may actually make the contract unenforceable.

Additionally, many businesses in Southern California are involved with trade or business with Mexico or other countries. This requires additional consideration of applicable law as well as how your contract will hold up in a potential dispute between U.S. and foreign business practices.

The language of your contract should be appropriate to you and your customers. Many small businesses deal with customers on a local, face-to-face basis. However, form contracts often use strong, aggressive, and archaic language. In effect, this “legalese” may turn off customers and make them more skeptical of the business owner's commitment to the agreement.

Getting advice on tailoring your contract may save your business money. In the beginning, talking to your attorney about drafting a contract may seem more expensive than downloading a free or discounted form off the internet. However, if any problems arise, the business owner may quickly find that a standard form contract offers little protection.

Some of the most common business disputes involve contract issues between employees and employers, buyers and sellers, or lessors and lessees. Many of these contract disputes involve the use of standard form contracts that do not adequately represent the business owner's interests. These disputes may be avoidable with a contract that is tailored to the business and its specific goals.

An experienced business attorney will help you create a contract that is appropriate for your business setting, protect your interests, and conform to the law. This initial investment will give you peace of mind and may save your company from expensive litigation down the road.

Butterfield Schechter LLP is San Diego County's largest firm focusing its law practice on employee benefit legal services and business counseling. Our firm can help you create specialized contracts that protect your interests and your business. Contact our office today with any questions on how we can help you and your business succeed.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.


R. McBride Reply

Posted Nov 29, 2016 at 01:56:13

Great job spreading the message. I agree with you completely on the risks of form contracts. Too often business people grab a form and run with it — not realizing that a good lawyer would customize a lot of terms to really protect a client.

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