27 Jul

The Hidden Costs of “Free” and Cut-Rate Legal Documents

By Firm

July 27, 2015

Among other things, a written contract serves to formalize the terms of an agreement between parties—clarifying the obligations of each party in order to reduce the risk of confusion, disagreement, or non-compliance. The desire to mitigate risk with a formal, written contract without incurring the cost of an attorney leads many to search the internet for the legal information or documents they need. When you can find virtually anything through a simple Google search, the temptation to use free or discount legal documents from websites like Legalzoom.com in order to avoid a big legal bill is perfectly understandable. Certainly, some on-line legal resources can provide tips, guidance, and explanation of basic contract terms or issues that may otherwise have been skimmed over or missed altogether. How formal, complex, or individualized a contract needs to be usually depends on the value of what the contract puts at stake, and sometimes a free/discount legal document may be an appropriate, cost-effective solution. Furthermore, it is almost always better to have even a simple, signed and dated written agreement than to have nothing in writing whatsoever, even if the parties draft the agreement without the assistance of an attorney.

The real risk in using internet contracts and legal documents, however, is that they often do not address the laws of a specific state or consider the unique circumstances or needs of the person downloading the document—oversights which can cause significant trouble later on. The pitfall of many contracts is not what is in the contract, but what is missing. For instance, our firm commonly encounters situations where a client will ask us to review an extensive partnership agreement that another partner found on the internet. At first glance, the sheer length of the agreement, the hyper-specific provisions (usually addressing tax matters), and the flowery legal terminology seems quite impressive and comprehensive. However, what we usually find is that, in addition to containing a multitude of overly-complicated and inapplicable provisions, the agreement also fails to adequately address certain, key issues of the client’s specific partnership, e.g., what happens to the business upon the death or disability of a partner, what to do if a partner stops participating or no longer desires to be in the partnership, and especially, what to do if the partners no longer get along and want to separate. In our experience, the cost to clients who prefer us to review, revise, and “fix” internet documents regularly equals or exceeds the cost to clients who have us draft a document from scratch specifically tailored to their needs.

Furthermore, sometimes individuals and businesses recycle, tweak, and re-use the same defective contract for years seemingly without any problem and thereby instilling the belief that the contract is perfectly fine. Truth be told, the vast majority of contractual relationships are free from any sort of significant dispute, and most minor issues are resolved without much conflict. As a result, even significant errors and drafting issues that exist within the contract often go unnoticed.

However, in the minority of instances where a dispute does occur and the contract language has to be analyzed and interpreted, the legal inadequacies and lack of individualized drafting are brought to the forefront. In those cases, the costs of resolving the dispute can end up being many times what the cost would have been to have an attorney draft a suitable contract from the start. If your legal situation is unique, complex, or one that could have serious financial or personal implications it is important to recognize that upfront and understand the potential implications of forgoing legal representation. If you are unsure whether you need an attorney, please contact our office for guidance.