Access to legal document templates is becoming ever-easier and cheaper for online users due to the rapid expansion of the online legal services market. However, what many potential users do not know are the potential dangers and complications that often arise from taking such an approach.
As legal advisers to many early stage businesses, we are often involved in the due diligence prior to an investment or an exit, and sometimes the documents which have been used are not fit for purpose. In the most severe cases, this has led to an investor or buyer walking away from the deal.
Extreme caution should be exercised when using online templates, and here are some of the reasons why.
In the first instance, it is important to know that the document you are looking to use is actually the correct document for the intended purpose. In the absence of legal knowledge, you may for example, decide to use an non-disclosure agreement (NDA) instead of a consultancy agreement. Engaging with a legal adviser at an early stage will allow you to steer clear of using the wrong documents and having to get new documents signed at a later stage, sometimes when it is more challenging to get someone to sign it. We have seen many examples of this which have left a business open to risks.
Signing a document
Different countries have different laws when it comes to validly signing a document and even within Scotland certain documents need signed in different ways in order to be legally valid. It is important that you fully understand who needs to sign and in what capacity and whether or not a witness is required for the signature. Speaking to your legal adviser will ensure that all of your documents are executed properly.
A simple online search for 'legal document templates' will return a vast amount of websites, each containing a considerable amount of templates to download free of charge or for a small fee. However, although these templates might legally stand up, you as a buyer must be careful of jurisdictional issues. To provide a basic example, US templates will not be valid in Scotland in instances such as Wills and Estate Planning, and with no personal and professional legal advice deriving from such websites to eradicate any doubt, what is spent now on professional legal services could be saved tenfold in the future (avoiding costly disputes or penalties). They may also be governed by laws in different countries meaning that you may need to go abroad to enforce contracts. We have experience of dealing with businesses which are registered in Scotland that have executed shareholders' agreements governed by US law and where the US courts have exclusive jurisdiction for any disputes. This is not practical and can be easily dealt with by a legal adviser.
Standards of drafting
Although the websites might draw you in with a cheap price tag and promises of little hassle, if it sounds too good to be true, it probably is. It may not even be a jurisdictional issue as aforementioned; it may in fact be that the legal document template is simply error strewn in relation to incorrect legal terms and structure (which an untrained eye may not recognise). It might also be that the style document is basic and not suitable for more complex matters. We have seen a number of examples of this e.g. simple intellectual property assignations have been used in businesses which require complex intellectual property and terms and conditions have been used which do not account for some of the crucial consumer regulations or distance-selling regulations, which puts the businesses at risk.
It is in the fine print of many of the online legal service companies that when you buy a legal document from certain companies, you waive the right to take action against them if a legal dispute were to arise.
Up to date?
As with the ever-changing nature of the law, documents need to be drafted in accordance with the current law. New regulations come into force and cases are also heard in court which can impact upon wording used in documents. In order to minimise risk it is recommended that clients seek specialist advice. Online legal document templates are not created to suit a particular client's needs; rather they are created with a one-size-fits-all approach. There may be key provisions which should be included in your specific document which the legal document template does not include let alone have a chance to consider.
Law firms in Scotland are regulated by the Law Society of Scotland and are expected to maintain the highest standard of service and conduct. A regulating body can provide welcome assurance to prospective clients in terms of credibility and accountability; however websites providing legal document templates are in many instances serviced by unlicensed advisers. It is therefore recommended that users leave nothing to chance and seek a regulated solicitor's advice.
Selling publicly accessible material
It can be the case that some companies are selling forms and templates that may already be free and found on government websites. In order to prevent this from happening it is best to do some research of your own and consult a solicitor on the best course of action. Although many templates are advertised for free, additional provisions that need to be included in the forms will most likely not be free which can be misleading to users.
There are certainly instances where using an online style document will be adequate for what you require and it will help minimise costs, however it is worth considering the associated risks.
Instead of isolating yourself, why not speak to a team of legal professionals to guide you not only with respect to current needs but also to provide a personal and proven service in the future and who will actively engage in assessing your risks and opportunities?
Sometimes the added value they can provide is also invaluable, whether it is putting you in touch with manufacturers, potential investors, or marketing gurus, or featuring your business in their next newsletter.