“Tailored contracts versus off-the-shelf contract templates”
I often am asked the question of whether the contracts that Contracts4You draft for its clients are off-the-shelf templates?
The outright answer to that question is “no”.
There are tonnes of websites offering templates, which businesses can buy off the shelf. However there are not many service providers offering personalised and bespoke services such as those which Contracts4You provide, apart from law firms (who as we know charge over the odds prices and often do not provide an all round contract management service).
Why businesses shouldn’t use an off-the-shelf contract?
Contracts should be drafted in a form which fits with the client’s business, and which manages commercial and legal risk related to the client’s business operations and relationships with other parties.
There have been numerous legal cases where courts have deemed material clauses in a contract to be unenforceable because those clauses do not reflect the business practices of the party seeking to enforce the contract, leading to costly implications. For example a supplier was forced by the High Court to pay damages of £110,000 to the opposition party because an exclusion clause in the contract was judged to be unenforceable, due to that clause not reflecting the actual sales and contract process of the supplier.
So as you can see, using a contract which is not tailored to your business could be potentially very damaging, not just financially, but also from a reputational angle too.
Why else shouldn’t you use an off-the-shelf contract?
There are further compelling reasons for why businesses should not use off-the-shelf contract templates:
- A template may not outline yours and the other party’s obligations and liabilities (or limitations of liabilities) in full.
- A template may not reflect your business’ operations, practices and policies.
- A template may not fully consider the legal and commercial risks related to your business and/or a particular business deal.
- A template may not reflect your legal and commercial expectations.
- A template not be fully accessible and understandable to all parties.
- A template may not align with current law and regulation.
As a live example, we were approached by one of our bookkeeper clients to review their terms of engagement which they provide to their clients when providing services. Her existing terms were provided by her professional bookkeeping authority. Upon inspection of the template we found that the terms did not fully explain the full range of services which my client provided; it did not adequately limit her liability opening up the risk of greater financial loss; and it did not fully outline her intended payment terms. We were able to to discuss and understand our client’s intentions, operations and services from the outset, and design a bespoke set of terms tailored to her business and business relationships. This enabled her to be fully aware of the content of her terms of engagement prior to providing these to her own clients for agreement.
Ultimately you should remember that your business is unique and has its own tailored requirements. What may fit for your business may not fit for another business.
We would also stress the importance of reviewing your contracts on a regular basis. Have a read of our blog: “How often should a business review its legal contracts?”.
If you are interested in having your contracts drafted by Contracts4You, or you would simply like us to review your existing contracts, please do not hesitate to contact us.
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