Thursday, August 26, 2010

One Size Does Not Fit All, Or Did You “Borrow” the Right Contract?

A client asked me to review a contract and tell him if he should make any changes. I knew immediately that he had not written the contract and he admitted that he “borrowed” it from his previous employer. “Borrowing” or “stealing” contract forms is not unique to the transportation field where many written contracts such as leases, broker agreements, and independent contractor agreements are required and the terms of these agreements are often heavily regulated, but it is a very common practice. The client often wonders why they need something new when they are holding an agreement that, in their mind, is just fine. In addition, the client will always ask why they should pay to have an agreement prepared when they can have one for free? From my point of view, I am concerned that the “borrowed” agreement may not describe the basic terms properly and it may not protect my client in the event of litigation, government audits, or other similar problems.

While the “borrowed” agreement concept makes sense to the client because it is less expensive than hiring an attorney, consider the following. There is no “one size fits all” agreement. Normally, there is language in the “borrowed” form that will not fit the client’s needs, or worse yet, will work against the client. Under the best of circumstances, the agreement was written to meet the needs of another company, not my client. Also, the person my client took it from may have “borrowed” it from someone else. In other words, how does my client know who wrote the agreement and should he trust the agreement if he does not really know where it came from? From the different formatting and writing styles, I suspect that the agreement I described above may have been borrowed, re-borrowed and modified several times. However it started, by now it is just not a very good agreement. My client assumed the agreement is just fine because he trusts the person he “borrowed” it from. What if my client borrowed a really poor agreement in the first place, but did not see me first? I suspect that he could have bought himself some serious problems by getting something for free.

To some people, the problem I see with the “borrowed document” concept is difficult to understand. They see a lot of pages and a lot of words talking about different matters. They assume the agreement must be fine because someone else is using it and in addition, they can get it for free. For the same reason, clients frequently want a “standard contract”, because once again, they see all those words and think all these agreements must be the same. In 38 years of law practice, I have heard this over and over, involving everything including buying or selling a house, lease agreements, wills, living wills, employment documents, bills of sale, business agreements and many other situations, as well. Some of the transportation related agreements I mentioned truly are long documents and if you just look at the paragraph titles, they cover the same issues. They may all appear to be the same, but they are not, and it is impossible to tell if they help or hurt without reading the entire agreement. Even if these agreements were all the same, one agreement just cannot address the different needs of every client.

Two examples illustrate the dilemma. Clients and potential clients frequently ask why they need an attorney to review a real estate purchase agreement, because they assume the forms are all the same. I know these agreements are not the same since I have dozens or of different real estate purchase agreements in my office alone. I also have publications and seminar materials with different purchase agreements labeled “Pro Buyer” or Pro Seller”. They look the same on the surface, but they are definitely different. The other example involves an association in the transportation field that publishes different contracts for its members to use. These forms not only come with many alternate provisions to select from, they also come with a separate set of instructions for how to use the forms. The association gives their members different choices because everyone does not have the same needs.

The agreement I described at the beginning verifies my concerns. Aside from being very long (which is not necessarily bad but in this instance it is longer than necessary), there were many problems. It did not comply with the motor carrier leasing regulations. Using the agreement would cause the client to violate the law in Michigan governing workers compensation and independent contractors. It included an agreement to use a service company my client would never use. The names of some parties were switched so that the obligations of the parties were reversed. It was very poorly written. I suspect that this agreement was not even good for the company my client borrowed it from. More significantly, my client had no idea what most of the agreement said or whether the agreement was good or bad for his particular business. While I could make the agreement useful, it is never going to be as good as an agreement tailored to meet the needs of my client.

Now, what is the difference to the client between “borrowing” an agreement, or hiring an attorney to write a new one, aside from the fact that one is free and the other is not? First, if the client hires an attorney, the attorney is responsible to make sure the agreement is properly written. Second, the client will get an agreement that meets the needs of that client, not what someone else needs. Third, the client will get an agreement he can understand and in some instances, use again in the future. Last, the client will then get professional advice, not just a document. The lack of advice is the same problem that concerns me about using an agreement taken out of a form book. Some of the forms available for purchase or at the library are very good and some are not, but even the good forms need to be the correct “good” forms for the specific situation. The attorney you hire will know which forms to use and be capable of writing additional language that does not come out of the book, the language the client needs to make the agreement work for himself or his business.

If I write an agreement and I use the wrong language, I am responsible for the problems with the agreement and any bad advice I have given the client. If there is a problem, the client will look to me to make things right. If a client uses a “borrowed” form (and remember, he will never know the real source of that document), he is doing so at his own risk. In that case, I hope he takes it from the right person. The last one did not.

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