The answer is YES.
In some cases, these standard form contracts set up the terms and conditions by one of the parties in a transaction does business with another. In others, these so-called “form contracts” can give you a false sense of security. Think of them as using an umbrella in an avalanche. The difference between the two types of forms is the difference between personalized stationery and a mass-market greeting card.
First, let’s talk about a form contract that works. It lets you put in place a set of rules governing your deals that you have determined (most likely in consultation with a lawyer) are either necessary to protect your business’s interests, or required from a regulatory standpoint.
This type of form contract is the one that you use when your business requires you to enter into similar deals with customers over and over again. You might be a landlord who signs a lot of leases, or a contractor who has a lot of home improvement agreements, or a lawyer who enters into engagement agreements repeatedly. When a business finds itself signing mostly similar deals repeatedly, then this kind of form contract is what you want.
Depending on your particular needs, this kind of form contract can be pre-printed with blanks to fill in the information that varies from deal to deal (think of an invoice or a purchase order with a bunch of “small print” on it). Or it can be a Word template that you modify and print out for each new transaction.
Like stationery, a good form contract, in short, is one that is custom-made for you, and intended for you to use repeatedly. It protects your interests, standardizes your obligations, and minimizes your legal exposure.
Now, let’s talk about the kind of form contract that gives you a false sense of security. These contracts are written for nobody in particular (or someone other than you), but they seem to relate to the type of transaction you’re about to enter into. You can find such forms all over the internet. Some are free. Some you pay for. But you don’t pay much, and that’s why they are attractive. Because who doesn’t want to save money if they can?
There are a number of potential problems with forms like this. Different states have particular requirements for different types of contracts, and a generic form might comply with the laws of one state, but not yours. For example, Connecticut requires certain terms to be included in home improvement contracts. If those terms are not there, the contract may be unenforceable. A home improvement contract that is not written for Connecticut will not help a Connecticut home improvement contractor.
Also, this kind of form contract most likely won’t correspond to the way you do business. Having a contract that defines a relationship that is different than the one you actually have with your customer is a very bad idea, because you could be breaching the contract, all the time, without realizing it. Similarly, the contract might provide for relief in the event the other party breaches the contract that does not compensate for the injuries you actually will suffer.
Having this kind of form contract is probably worse than having no written contract at all because it creates a false sense of security. You think you have done what you can to protect yourself, but you don’t realize you haven’t until it’s too late.
If you have searched for a form contract on the internet, or in the library, you should congratulate yourself for being risk-conscious enough to be thinking about a contract. But after you pat yourself on the back, you should step away from the computer or bookshelf, and get yourself a contract that actually will work for you.