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I ran across a publication the other day called Business Contracts Kits for Dummies. It is a “fun and easy guide to business agreements that cover your assets!”

But should a business owner really draft important contracts without counsel? I have to say, that with my writing background, drafting and negotiating contracts is one of my favorite things to do, but I think few lay people would be energized by warranties, disclaimers, severability or indemnifications. Indeed, I work with many small business owners who often do not realize the significance of the standard terms and conditions in their contracts.

I am all for educated and empowered clients, and often work collaboratively with my clients to save on legal fees.

But contracts have far-reaching and high-dollar ramifications. The safest course of action is to bring in an attorney every time. Many experienced, sophisticated business people don’t truly understand limitations of liability, warranties and indemnifications. They don’t know to include venue or choice of law, or a host of other things that seem to be mere boilerplate.

This week, I am negotiating with a business owner who hired my client to develop a software component to be incorporated into a larger project. Standard procedure is to include a mutual indemnification agreement that balances the risks faced by each party. The business owner steadfastly refuses to include any indemnification provisions. He says– and I believe him and respect his stand-upness — that he will stand behind the final product 100%. But it is not up to him. An end-user who gets notice that the product infringes a third-party’s copyrighted software will sue everyone involved. It doesn’t make a lot of sense, and I truly wish the other party were represented by counsel.

If you don’t understand what’s wrong in the previous paragraph, I submit that you should concentrate on your core business competency and let me concentrate on mine — protecting your business.

How can you decide whether it makes sense to draft your own contract? As with whether a business owner should incorporate without an attorney, it depends on a variety of factors:

• How simple is the transaction?
• How experienced is the business owner?
• What is the value of the transaction?
• Can the business afford an attorney?

Obviously, the simpler and lower value the contract is, the more sense it makes for the business owner to draft the contract himself or herself.

From my point of view, the earlier you bring someone like me on, the cheaper and easier it will be for usto protect you. It can be very time-consuming to find and fix all the “gotchas” in an existing contract. It is even worse to have to tell the client he has no recourse for poorly manufactured goods he bought, there are no penalties in the contract for non-payment, or they lost their intellectual property protection.

What is your experience in drafting legal documents?

Tags: attorney, choice of law, Contracts, DIY, draft, drafting, indemnify, lawyer, limitation of liability, negotating, negotiate, venue, warranty

This entry was posted on Monday, March 30th, 2009 at 10:56 am and is filed under business law, Contracts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.