Legal documents are a necessity in any business. You need them to record your transactions and to form agreements with suppliers, contractors, employees, customers, investors, and more. And we all know that anytime you can get something for free, it’s a good thing. So the only logical conclusion would be that free legal documents are pretty much the best thing since sliced bread, right?
WRONG. Free legal documents might be free right now, and they’re easy to fill out when you just need something in writing. But in the long run, they can actually end up costing you a lot more than you think.
I know what you’re thinking. “Wait a minute. That doesn’t make any sense. How can something that’s free cost you money? I mean, there are even multi-million dollar companies like DocStoc, RocketLawyer, Docracy, and more that built their businesses almost solely off of free legal documents. How can free legal documents be so bad?”
The answer is because free legal documents do not adequately address all the important legal issues in the majority of business situations. This means you are more likely to end up in a lawsuit when problems arise, and when you do, your free legal documents won’t be there to protect you.
Free legal documents are drafted to be as general as possible so that they can apply in a wide variety of business situations. The problem is that there are so many different kinds of businesses and business models that it’s not even possible for a free legal document to properly address all the legal issues that apply.
Let’s consider a free consulting agreement like this one, for example. Two businesses would like to use this consulting agreement: 1) a burger restaurant that needs a consultant to help open new franchises; and 2) a mobile app company that needs a consultant to help with its user interface design.
Clearly these two business situations are radically different. How can a basic consulting agreement account for all these differences when the nature of the relationship between consultant and company is completely opposite? Unfortunately, it can’t.
Most of the time, nothing happens. The consultant signs the agreement, does his work, gets paid, and moves on with his life. Both sides are happy.
But occasionally, things go awry, and when there is a dispute, free legal documents just don’t cut it. You may have gotten the deal done for free, but you’ll end up spending thousands when you have to go to court to settle the dispute.
The difference between free legal documents and lawyer-drafted documents comes down to detail. Lawyers are trained to watch out for problems. They think of all the things that could go wrong in any business situation before the deal is ever done. When all the potential problems are properly accounted for in a legal document, lawsuits are a lot less likely. You can always go back to the document and show the other party the exact language that answers their questions and resolves the possible dispute. Case closed.
Free legal documents can never have this same level of specificity because they are written in order to be applicable in every possible situation, not just your situation. Naturally, the potential disputes that can arise are unique to the situation, just like the deals themselves. Free legal documents can’t possibly address the situation, or the disputes that could potentially arise out of it. So anytime you’re dealing with an important agreement, you’re taking a major risk when you use free legal documents. You’ll end up spending a few hundred dollars now to get a lawyer to help you, but you’ll be a lot better off than if you have to spend $20,000 on a lawsuit a year later when the deal goes sour.