Danger ahead. We see it all the time. Entrepreneurs and business owners just like you, reluctant to call a lawyer for advice on contracts. After all, can’t you just do it yourself, like the other parts of your business that you’ve DIY’ed? Well, you can try, but that doesn’t mean you should. So what are the dangers of self-drafting a contract when you’re not a lawyer.
Let’s be clear: the involvement of a lawyer is not strictly required for a contract to be enforceable. A contractual agreement is either enforceable or not, on its face. What this means is that a court will look at the contract to see if it is valid and if it is legally enforceable. Contracts written on napkins or scratched into walls can be (and have been found to be) enforceable. But enforceability is a low bar. You want to make sure that a contract isn’t unfavorable to you in some way that you are not aware. Are you willing to risk your business, your assets (potentially even your house) on your ability to draft a contract (or that random contract you found online)?
It may not be a valid contract
In its most essential form, a “contract” is an agreement among two or more parties. Contracts must have offer, acceptance, and consideration to be valid. Photographer A will provide a 1-hour photographic portrait session for client B on DDMMYY at Y location, and client B will pay Photographer A $XXXX for the session which will/will not include XX number of images. If there is not a clear statement of what is being agreed to, or the “consideration” is not described plainly, then a contract may not be valid.
You might not be contracting with who you think you are contracting!
Sometimes self-drafted contracts don’t make it clear the entity (a person or a company) entering into the contract, and who can be required to “perform” their obligations in relation to the contract. There is a legal difference between an individual or a company.
Words don’t mean what you think they mean
Think of legal language as a dialect of English. Words often have meanings that are different from your general understanding – this is because the courts may have decided that they have a very specific meaning.
The court needs to be able to understand what is being agreed
The whole point of a contract is to make clear the rights and responsibilities of both parties. If there are clauses (a lawyer word for sections/parts of the contract) that are unclear or ambiguous – for example, two of the parties disagree about the meaning of a part of the contract, and it isn’t obvious to the “reasonable person,” the court will generally apply established rules of contract interpretation. If you are self-drafting contracts, you should know that one of the established rules the court will apply is that any ambiguities in a contract will be interpreted against the interests of the party who drafted the contract. This is because it is the responsibility of the party/person who drafts the contract to try to avoid ambiguity! What this means for you as a non-lawyer is that when drafting a contract, the court won’t care you are a non-lawyer, but they will care that you drafted the contract.
What works in one location doesn’t always work in another
One of the biggest mistakes made by non-lawyers who attempt to draft their own contract is that they fail to understand the important role jurisdiction plays in the interpretation of contracts. This is one of the most common issues with template contracts you buy online is that they may not be a good fit for the laws of your state or the type of agreement. This is where “boilerplate” clauses and language can be unhelpful! This is why we always recommend template contracts be reviewed by a local attorney who understands!
You think you are agreeing to X when actually you are agreeing to Y
If you’ve spent any time around lawyers, you’ll have noticed that they can be pretty pessimistic about all the things that can go wrong. This is good for you because foreseeing potential problems that could arise in your specific situation and with your specific contract can make a massive difference if any of those things end up happening! One of the common issues that we see with self-drafted comments is that people think they are agreeing to one thing, when in fact they are agreeing to something else – for example, you might not realize that the contract heavily favors one party or allows only one party to cancel the contract or a similar type of clause.
You may need more than one type of contract or legal document for your Business
One size, or in this case one contract, does not fit all. You may not be aware of the areas of your business that need protection. For example, employment agreements, nondisclosure agreements, intellectual property transfers and assignments, all might be necessary to enable you to own what you think you already own or to make sure you don’t inadvertently sign away your rights.
You may not contemplate how to handle a clause or agreement that is held by the court to be illegal or unenforceable
If you are self-drafting a contract, it is unlikely that you will have included clauses that make it clear the intent of those that have agreed to the contract if one or more clauses are held by the court to be illegal or unenforceable. Generally, you and the other party want the contract as a whole to still stand even if it can’t be entirely enforced. An attorney knows to include what is known legally as a “severability clause.”
A self-drafted contract may not foresee all the issues and complications that might arise
A contract needs to clearly articulate the transaction, but that’s not all a well-drafted contract will do. A well-drafted contract will also clearly explain what the parties agree will happen if one party doesn’t follow through on their responsibilities under the contract; it will limit your liability in circumstances that are beyond your control, and it will make clear that the contract is the whole agreement.
Some final words on the dangers of self-drafting a contract when you are not a lawyer
In the very least, make sure your contract can be used over and over with confidence. Invest in having an attorney review your attempts at a self-drafted contract so that you avoid the pitfalls!
We have also seen time and time again that it costs far more to solve problems that could have been prevented by paying an attorney to draft a contract correctly the first time around. Sometimes DIY or self-drafted contracts lead to losing rights to valuable assets, exposure to financial risks, and expensive lawsuits.