Knowledge Hub | Articles

09 November 2018

DIY contracts - the sinkholes of small business

David Smellie

David Smellie

Tel: 01753 279034

David Smellie, partner in the corporate and commercial team believes that DIY contracts are a bit like sinkholes. The road covering a sinkhole looks like it’s doing its job as cars drive over it every day. But if it collapses the impact an be catastrophic, as there were no solid foundations underneath providing support. In the same way if a dispute arises between you and the other party to your contract, then your DIY contract will be scrutinised very closely and although it may have looked the part when first created, it could soon become clear that it offers little protection, and the expense and time spent dealing with a dispute could be disastrous for your business.

DIY contracts

There is no getting away from the fact that contracts can be downloaded from the internet for little or no cost. This, of course, is a huge draw for companies that wish to keep costs down. Business owners may also feel that all contracts look the same anyway and there will never be a need to refer to their DIY agreement ever again as things are going so well with the other party, so why invest in one which has been legally drafted?

This approach can bring huge risks as no one knows what the future holds. What if your co-shareholder wants to sell his shares or the business? What if a co-founder isn’t pulling their weight? What if a supplier reneges on what they promised to deliver? If there are ambiguities, discrepancies or omissions in your DIY contract then any dispute that arises could become protracted, costly and result in high court fees and lost management time.

Legally drafted contracts

In a meeting with your lawyer you should be encouraged to consider a variety of different outcomes to the various relationships involved in your burgeoning business. Your lawyer should find out about your relationships with your suppliers, clients or partners and take time to understand how your business operates so as to produce a carefully drafted, tailored contract which will offer you protection should you ever need it. It will include relevant clauses and clear terminology.  

If you never have a dispute then you will not need any formal contract or agreement.  Lots of businesses get away with using DIY contracts or even having no contract at all.  However should a dispute arise then legally drafted contracts will be worth every penny.   It’s an investment for your future.

What could happen if my contract isn’t drafted by a lawyer?

  • A video production company regularly creates footage for your website. You now wish to change to another supplier, but as there was no clause in your contract confirming ownership of material, a dispute arises as to ownership of the footage and the video production company tries to stop you using the footage until the dispute is resolved.
  • You are selling your shares in your company and a large part of the purchase price that will be paid in the future depends on future sales of the company, however the agreement does not provide how the Buyer is to conduct itself after completion.  The Buyer moves all business to a new company.  This could result in a dispute as to what, if any, future consideration is payable.

We understand small businesses

We understand a small business’s requirement to keep costs as low as possible. If you can tell us exactly what you’d like to achieve, we will provide an approximate fee for producing the agreement that you are looking for and we always work in a way that is as cost effective as possible.  

A solicitor with commercial expertise and a comprehension of the complexities of the law will produce an agreement that is appropriate for your business needs and fit for purpose.

For further information, please contact David Smellie by calling 01753 279022 or email commercial@bpcollins.co.uk

Stay in touch

Phone: +44 (0) 1753 889995

Email: enquiries@bpcollins.co.uk

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