At least once a week, I am asked whether I have a template agreement that covers a specific situation. I am also often asked to review template agreements found or purchased online. While the typical client realizes that the situation calls for a written agreement, except for limited situations, it is unlikely that an agreement I previously drafted or an online template would, without review and revisions, fit the client’s specific situation.
A number of dangers arise in using template agreements. Take this example: A company (the “Company”) engages four individuals as independent contractors to provide certain services in Washington. Each contractor is engaged at different times over the course of several years. The Company enters into written agreements with each contractor. Over the years, the contractors become increasingly dissatisfied with their compensation and working conditions, terminate their agreements with the Company and start working for a direct competitor. Each agreement prohibits the contractor from working for a competitor, so the Company brings a lawsuit against the contractors to enforce its rights and stop the contractors from working for the competitor.
These contractors were all providing the same services in Washington, but each agreement was different. For example, a different state’s law governed each agreement: Wisconsin, New York and Washington. In addition, each non-compete clause and non-solicitation of customers clause was different. Finally, one agreement had been in place for over ten years. These facts lead me to believe that the Company did not take the time to review and understand each agreement before signing or to regularly review and improve its existing agreement. The Company may have merely used the agreement last executed, without review or consideration of the exact circumstances of the situation at hand.
While a number of different legal issues were at play in this particular case, one glaring mistake I see is the Company’s failure to tailor the agreement specifically for its relationship with each contractor. This failure proved fatal to the Company’s claims against the contractors. In fact, the Company’s claims against the contractors were summarily dismissed, and the counterclaims brought by each contractor (which were failure to pay wages owed, failure to provide meal and rest periods and taking unauthorized deductions from wages) were allowed to proceed to trial.
Yes, some companies do have template or form agreements for repeat transactions. For example, some of my clients have form nondisclosure agreements, purchase of goods agreements and services agreements. However, I always advise the client to review the agreement and consider the specific circumstances of the new relationship before signing. Businesses evolve, problems arise that need to be addressed, and the law changes. If agreements are not reviewed regularly, costly mistakes can be made.
When considering templates, here are a few tips.
1. Templates are merely starting points.
2. Read, review and consider the agreement before you sign.
3. “There’s no such thing as a free lunch,” and other quirks, templates found online are often filled with typos, incomplete sentences, and you have no idea who drafted them.
4. Don’t blindly accept someone else’s agreement because that person says it’s his or her template. If you have questions, ask.
Meghan Williams is a partner at Miller Nash Graham & Dunn LLP in Vancouver. She concentrates her practice in general business and real estate law. Her clients range from individuals and small businesses to large publicly held companies. She can be reached at 360.619.7029.