I’m often asked whether a lawyer is needed for a particular contract job, or whether a template document would be adequate. It can be a frustratingly difficult question to answer. In seeking out legal services, small businesses usually want reassurance that they are “covered” for legal risks, but aren’t necessarily interested in learning about the exact nature of those risks. However, all business involves risk, and no contract is perfect.
The real question is whether the risks are acceptable. But if a business owner or manager isn’t interested in learning about the risks, how are they going to make that assessment?
Sure, template legal documents can help reduce legal risks and aid legal compliance. All else being equal, if you are entering into a contract you will be much better off using a well-drafted template than starting from scratch, or patching something together from documents found on the internet (this may constitute copyright infringement). However, a template adapted by a non-professional will rarely be the optimal way of managing legal risk or ensuring compliance. The fact is that no legal template supplier can ever advise a customer that a template is an optimal solution.
A template is a tool, or set of tools, nothing more and nothing less. Asking a supplier of template legal documents whether a particular template is adequate for a particular job is rather like asking a shopkeeper selling plumbers’ tools whether a particular set of tools will enable you to install a new plumbing system. The tools may well be designed for exactly that sort of job, but some of the tools may be superfluous, and additional tools may be needed. Even if you have all the right tools, that’s no guarantee that you are going to do a good – or even adequate – job. The outcome depends as much, if not more, on the skills of the person doing the work than upon the quality of the tools. If I installed a new plumbing system at home, you can be sure there would be leaks aplenty, even if I used the best tools in the world.
The one big advantage of using templates is cost: templates are a lot less expensive than lawyers, and with good reason. When you buy a template you buy an electronic file that can be resold many times. When you instruct a lawyer you are buying someone’s time – hopefully someone who has spent years acquiring relevant expertise. Even an inexpensive commercial lawyer will charge £120 to £150 per hour; an expensive one may have an hourly rate in excess of £500. The costs of instructing a lawyer to draw up a commercial contract will vary dramatically, depending primarily upon the complexity and scope of the job and the efficiency of the lawyer, as well as the the lawyer’s standard rate. For instance, a software licence agreement might cost anywhere between £750 and £15,000. A template software licence agreement would usually sell for less than £100.
With a good lawyer, you can be reassured that a contract properly reflects the business/transaction, that main legal risks relating to the contract have been identified and where practicable dealt with or mitigated, and that regulatory compliance issues have been dealt with. You also save yourself the task of adapting a template (although you will need to spend time giving the lawyer instructions, and checking the documentation produced to ensure it meets your commercial needs).
Of course, templates and lawyers aren’t binary opposites. If you instruct a lawyer, 99 out of a 100 times the lawyer will use a template or precedent as a starting point for their work. So, in one sense, you are always buying a template, and the question is not whether a template is adequate, but whether paying for the services of a lawyer is commercially justifiable. If it is, you should.