Should I use contract templates?

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What Is a Contract Template?

A contract template is simply a template that you can use to write a contract. Contracts are essential in almost every business setting. Common contracts you may need to use include:

  • Construction contracts
  • Employment contracts
  • Photography contracts
  • Rental agreements
  • Service contracts

Making a new contract from scratch each time can take a lot of work, and it also leaves an opportunity for error when details are not standardized. That's where contract templates come in.

Why Should Small Businesses Use Contract Templates?

Contract templates can offer a variety of benefits, including:

  • Cutting down the chance for errors: Templates already have all the required components of the contract. That allows the contract lawyer the opportunity to customize and delete clauses as needed, without risking to forget a key element.
  • Reducing the time it takes to draft a contract: A contract lawyer can use a template to cut down on the time it takes to craft a legally binding agreement, which saves the small business owner requesting the contract costs. This is the case whether you pay a flat fee or an hourly fee.
  • Offering customization options: Instead of going back to a lawyer for a new contract of the same type, small business owners can have a lawyer draft one template that they can again use.
  • Ensuring consistency: Businesses can keep things consistent by using the same template, for example, when using employment contracts each time someone new is hired.

When Do You Need a Written Contract?

Two main reasons for obtaining a written contract exist:

  1. The parties creating an agreement choose to put their agreement in writing.
  2. Legislation requires a written agreement between those two (or more) parties.

Once a contract is in writing, the document is considered a complete statement of the agreement's terms. Once the contract is written and signed, a party cannot argue that a statement made during the negotiations should be included in the contract if it does not appear in the written document.

Although certain verbal agreements may be enforced in court, written contracts clearly show what all parties agree to. Not only will having a written contract give you peace of mind, but it will also protect you if things don't go as planned.

You should use a written contract when:

  • You want to avoid potential misunderstandings with clients.
  • You are requesting or completing work that requires a specific:
    • Quality
    • Material
    • Size
  • You must purchase materials or insurance to complete a job before you get paid.
  • You must hire additional staff to complete a job before you get paid.
  • You need to ensure a client pays you after you complete a job.
  • You are doing work on a timeline and will get paid at certain milestones, or you agree to receive bonuses for completing tasks early.
  • Your insurance company requires you to have a contract.
  • You must meet a legal obligation to have a written contract (local trade associations and laws can help with this).
  • You or your client must keep information confidential. This could include:
    • Nondisclosure agreements ( Here is an article about NDAs)
    • Working with confidential business information
    • Working with confidential personal information
  • You want to have proof in writing for courts to consider in the event there is a dispute.

What Should a Contract Include?

A legal contract is a written document that one party draws up, which all parties agree upon. A legally binding contract can be between two or more parties. It identifies the parties' roles and obligations under the created agreement. A contract creates a responsibility or legal duty.

Any contract must include some key terms and clauses. All contracts should:

  • Detail the terms and conditions of an agreement
  • Lay out expectations for all parties, including:
    • Timeframes
    • Materials
    • Payments
  • Discuss what happens if there are disagreements

A contract that covers these details will help make sure every party in the agreement is on the same page. In the worst case, it also gives you legal standing to go to court in case something goes wrong.

For a contract to be legally binding, it should include at least the following elements:

  • An offer
  • Consideration, or something exchanged for the offer (usually money)
  • Acceptance, as both sides must accept the contract's terms
  • Mutuality, or all parties agreeing to the conditions and indicating that they understand they have entered into the contract ( Here is an article about mutuality)

What Should a Contract Template Include?

Many contract templates include basic sections every contract of that type should have. For example, if you are using an employment contract template, it will typically include:

  • Terms of employment
  • Employee responsibilities
  • Compensation
  • Benefits

Other employment contracts may include an NDA, or nondisclosure agreement, as well. All types of contracts will have a standard set of information the contract must include.

Tips to Keep in Mind When Using Contract Templates

You will want to keep some tips in mind when using or signing a contract created by a template. In fact, most of these tips apply to any contract, whether you write it yourself or use a template.

Research Regulations

Even if you are using a contract template, you should find out about local regulations that could apply to your specific circumstances. In addition to local requirements you may need to fulfill, you could also need to include industry association or union requirements in your contract. Other details that may need to be written into your contract include insurance restrictions and requirements, planning permissions, or obligatory fees.

Read Carefully to Check All Information

Before signing a contract, you should check it over to make sure:

  • The information contained is what you agreed to
  • The details and name are correct (and correctly spelled)
  • You understand the definition of all included terms

If there is ambiguous language that could cause confusion later on, you will want to address this before signing the contract. Once all parties sign, the contract is legally binding.

You may also want to see if your contract has an indemnity clause or another way of assigning responsibility for errors so you can see what you could be liable for.

Make Sure to Define Details

Your agreement will contain specific details beyond the template language used. Make sure your contract spells out all relevant information, defining key terms and exact services and products.

Your final contract should include:

  • All information for all parties involved
  • Start and end dates of the contract
  • Definitions of any key terms
  • Services or products you will be providing or receiving
  • Terms of payment, including:
    • Due dates
    • Milestone payments
    • Part payments
  • Interest or other fees for late payment
  • Liability and/or insurance requirements
  • Processes for dispute resolution and/or breach of contract
  • Special conditions

Exercise Care When Signing the Contract

While you are signing the contract, carefully look for all the different places where you need to fill in your information. Cross out blank spaces so no one can fill in information with something you don't agree to.

It's a good idea to have two (or more) original copies so that all parties can sign and keep an original version of the contract. That way, everyone has a signed record in case it's needed later on. You should keep your copy in a safe place for future reference in case there is a disagreement later on about the document.

When you create a contract template to use for your business, it's important to work with an experienced lawyer who can make sure all the necessary details for your specific situation are included in your final document.

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