Business Law: What You Should Know Before Copying Contracts from the Internet

By Nina L. Kaufman, Esq

Copying contracts from the Internet is a bit like wearing your old cousin's hand-me-down dresses . . . in order to walk into a bee's nest (an incongruous image, I know): yes, you're "covered," but the style is outdated and they usually don't fit you well. Plus, they won't provide you with the protection you need for your particular purpose.

Most small businesses can't afford the Versace of contracts, and, frankly, it's often not necessary. Sometimes, Kmart will do nicely. However, when you download something for free, it's usually worth what you paid for it. Internet contracts need to be mended and altered to make sure they truly fit how you want to do business. But if you have limited experience in making clothing, you risk having the garment unravel at the seams if you try to do it yourself.

In the interest of saving money, you may have downloaded a freebie contract from the Internet. But it's often what you don't know - and what's not included in the document -- that can hurt you. Internet contracts can be helpful resources for identifying issues for you to think about, but are usually not well thought out, nor are they tailored to the needs of your particular business. If an agreement is not drafted in your favor, it may not give you the flexibility and protection that you really need from your business relationships.

For example, I know of business owners who have formed limited liability companies (LLCs) and have downloaded their ownership agreements from the Internet. When "Jemma" got hers from a freebie Internet site, it looked long enough and comprehensive enough, so she and her co-owner (neither of whom are lawyers) signed it. Four months later, Jemma wanted to move to a different state to accommodate her husband's career path; plus, Jemma learned that she was pregnant. So the time was right to transition to her new stage of life. But her LLC agreement only allowed her to leave the business (1) if she had died (which she hadn't) or (2) as long as her co-owner agreed (which she didn't). In short, Jemma's agreement had no meaningful "exit strategy". And Jemma did not know that these were among the issues she needed to focus on in creating and signing such an agreement. There were a whole host of things that the LLC agreement did not include, such as how to deal with the client base that each owner brought to the business, how to place a dollar value on the intellectual property that each owner contributed, and how to leave the business should life changes (other than Jemma's death) arise. Jemma's agreement didn't cover any of these issues. In the face of an irate business partner and an insufficient agreement, Jemma found herself staring down the barrels of (1) a lengthy and expensive lawsuit to dissolve the business or (2) a less expensive (but more costly than it needed to have been) way to extricate herself from her business partner.

Similar things can happen with even the simplest of contracts with your customers. Download from the Internet all you like, but recognize that the document you copy (1) may not reflect the most recent changes in the law (how will you know?- ask a lawyer!); (2) may contain provisions that are harmful to your business (or omit ones that could help you), and (3) may not properly reflect how you want to do business with your customers. Internet contracts may raise some of the important issues, without a doubt. But they don't necessarily deal with the specific issues of your situation. In short, when downloading from the Internet: "one size fits all" usually means "one size fits none".

How to avoid this pitfall: ideally, by working with an attorney who really understands the legal issues that small businesses face. Although some entrepreneurs may try to economize with a do-it-yourself approach, they often end up costing themselves more because they are not trained, as attorneys are, to spot the issues and problems that can harm them. Taking the time to find a lawyer who meets your needs is one of the best investments you will ever make in the growth of your business. Find out more about how to hire and work with attorneys by downloading and listening to the audio class available through our sister site www.GreatBusinessLawResources.com. With the help of your lawyer, you can start to make the smart decisions that will protect your company and save you money!

© 2004-2009 The Legal Edge LLC. Nina L. Kaufman, Esq. is an award-winning business attorney, author, and speaker. Under her Ask The Business Lawyer umbrella, Nina offers easy-to-understand business law resources that protect small businesses and save them money. To learn more, and receive our FREE "LexAppeal" ezine, visit http://www.GreatBusinessLawTips.com  or contact Contact Us. This article is for your general information only. Be sure to consult with an attorney regarding your particular situation to make sure you get the specific advice you need.

Nina Kaufman, Esq. Award Winning Business Lawyer, Author & Speaker