Entrepreneurs can be reluctant to call a lawyer for advice on contracts even when they know they probably should.
But without a lawyer involved, contracts—or the lack of them—can have serious consequences. You might pay far more than you should, lose the right to valuable property, or expose yourself to unnecessary business and financial risks, including costly lawsuits.
Any litigator will tell you that untangling a poorly written or nonexistent contract can be far more expensive than paying a lawyer to do it right in the first place.
Here are four ways that lawyers save you money on contracts.
1. A contract written or reviewed by a lawyer is easier to enforce in court.
The whole point of a contract is that you can enforce it in court or through arbitration if the other party doesn't do what they're supposed to do. But a generic form contract or a contract you write yourself may not be enforceable in your state. Oral agreements are always hard to enforce and are not even valid for certain kinds of transactions.
If you write your own contracts, you risk leaving out key terms that are necessary to make the contract enforceable. A form contract that you find on the internet may be outdated or may not consider the laws of your state or the specifics of your transaction.
For example, many businesses have employees sign noncompete agreements, but state laws vary in the types of agreements they will enforce. Some states don't allow them at all. If you use a generic form, you may have no recourse if an employee leaves and sets up a competing business across town or online.
For this reason, it's important to have a lawyer write your contracts or review any contracts you prepare yourself.
2. A contract written or reviewed by an attorney will be complete.
Having an attorney involved in drafting or reviewing your contract can help you avoid risks and expensive disputes.
Lawyers are trained to write contracts that clearly explain what each party will do and to anticipate problems that might arise. When they review contracts that other people have written, lawyers keep an eye out for key terms that might be missing and suggest additional clauses if needed.
Whether they write or review a contract, attorneys recognize that a typical, well-written business contract won't just list the terms of the transaction:
- It will also describe what will happen if one party doesn't hold up their end of the deal.
- It may make allowances for circumstances beyond your control and limit your liability.
- It will include “boilerplate" clauses designed to minimize disputes over things like the scope of the agreement or where a lawsuit should be filed.
If all goes well, your contract is just another piece of paper. If you have problems, the contract's clear language often can help you resolve them. If you end up in litigation, a good contract can dramatically limit its length and complexity—and increase your chance of success.
3. An attorney can help you get better contract terms, saving you money.
Attorneys usually write contracts in a way that favors their clients. An attorney with experience in your industry will know what the customary contract terms are. An attorney can offer advice on typical contract terms or write a business contract that pushes the boundaries in your favor—potentially saving you thousands of dollars.
If another party is drafting the contract, you should expect that their lawyer has done the same thing. Your lawyer can review the contract and advise you on reasonable terms, as well as a negotiating strategy.
For example, commercial leases almost always favor the commercial landlord. They may impose high rents and maintenance fees, with severe consequences if something goes wrong. A lawyer can spot any unfair terms and advise you on what to ask for instead.
4. An attorney knows which standard contracts your business needs.
A lawyer can identify all the contracts you need to protect your business. These might include employment agreements, terms and conditions, nondisclosure agreements, and intellectual property assignments.
For example, you may think you just need a simple nondisclosure agreement to prevent employees from making Facebook posts about the software product you're developing. When you consult an attorney, however, you learn that the software isn't owned by your business at all because the creator hasn't signed an intellectual property assignment agreement. Without that additional contract, you may never attract investors or bring your product to market.
Getting good legal advice about contracts can be critical to small business success. While you can find and work with a local attorney online, there are also affordable legal plans that allow you to speak with an attorney about your contract concerns and get helpful review and advice regarding your contracts.