Using standard contract templates in a business on day today basis for the similar types of the business transaction is common. Templates helps in saving the time and money but comes with associated risks and repercussions which are better to be know prior use and take steps to reduce and avoid the risks. Below are some of the illustrative risks associated with use of contract templates.
I) Risk: Template usually lacks holistic approach and understanding of business transaction thereby carries more risk than specifically drafted agreements.
*How to Reduce Risk while using Contract Template
Use the template only after required changes and customisation considering each business transaction. Do required edits to the templates prior use be it addition or deletion.Always better to avoid use template in the large, complex and high-stake business transactions
II) Risk: Templates are in generic nature and may add more unintended obligations
*How to Reduce Risk while using Contract Template
Never use template without review and delete all the unnecessary terms thereby you can save your business from unintended obligations
III) Risk: Failure to add required legal provisions and compliance considering the transaction and industry may invalidate contract thereby contract may become unenforceable.
*How to Reduce Risk while using Contract Template
Understand the business transaction, know line of business and also know applicable laws and regulatory provisions impacting transaction then accordingly add compliance provisions be it law or regulations to the contract template.
IV) Risk: Template may contain unclear clauses or vague language using that is business risk which may lead to costly litigation in future.
*How to Reduce Risk while using Contract Template
Clarity is core and crucial in any contract so make sure the clauses written template are clear to you and the clauses are relevant to the transactions. If not then remove all those clauses and language used
V) Risk: Template may omit essential terms
*How to Reduce Risk while using Contract Template
It is must to add the essential clauses to contract especially not lose rights and revenues and if temple is missing then insertion of all the essential terms and conditions of the transaction to the template prior signing is must. Otherwise, business may incur huge loss
VI) Risk: Choosing Non-Appropriate Contract Template in case if the template is used by non-lawyer like business person may use wrong one without knowing the implication then it may lead to loosing rights and remedies along with unintended obligations
*How to Reduce Risk while using Contract Template
If you are non-legal professional and using the template without knowledge then definitely its huge business risk. Don’t use any contract template without reading and understanding its implication on the business and transaction. If required take professional help to review and confirm on the contract template as to its correctness to the business transaction.
Remarks and Suggestions
Contracts are useful if they clearly reflect intentions of the parties and aligned to the purpose for which contract is signed. Hence tuning contractual terms and tweaking language used in the template to specific requirements is must while using the template. Synergy between business aspirations and law is need of every contract which governs the relationship between parties that is difficult to address in standard contract templates. Obligations, representations and warranties may look generic at cursory look but plays big roles once contract is signed. No clause is less important in any contract when the problem or dispute arises. Think before ink
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* Write up by Team Purple Pursuits, for more details you can reach to us [email protected]
