What Can Go Wrong if My Business Uses a Competitor’s Contract?

A contract is a vital tool to protect your business from risk as a supplier and should be a key priority for you as a business owner. Using a competitor’s contract might seem like a tempting, quick, and easy fix to save time and money, but it can lead to big problems that could harm your business. This article explores why having a tailored contract is essential, and the risks and damage your company could suffer if you copy a competitor’s contract. 

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Why is Your Contract Important?

Your contract is a vital tool for protecting your business relationships. It documents your agreement with your customers on critical issues such as the scope of your obligations and liabilities, when you will get paid, and how to handle disputes. It can also include critical provisions around protecting your business’s confidential information and intellectual property rights. 

Without a robust and bespoke contract that is appropriate and fit for the purpose, your business risks misunderstandings, legal issues, and customer problems.

A bespoke contract is vital because it is carefully tailored to match your business’s unique needs. The key purpose of a bespoke contract is to address specific risks and legal requirements that generic or copied contracts simply cannot cover. By focusing on your products or services, a bespoke contract will help you protect your business by ensuring your terms comply with relevant laws and safeguarding intellectual property. 

A bespoke contract will also reduce the risk of disputes by clearly defining all parties’ obligations, thus preventing potential misunderstandings. Investing in a bespoke contract will protect your business from unnecessary risks and provide peace of mind, ensuring you are fully prepared for any challenges. 

What Can Go Wrong if You Use a Competitor’s Contract?

Let us imagine you have a business competitor who offers similar services. You manage to get hold of the competition business’ customer contract, and wonder if you could replicate this for your business with a quick copy and paste. This is risky and a wrong move for your business. Here are some key risks you should be aware of when taking this approach:

The Contract May Not Fit Your Business Needs

The fundamental purpose of a contract is to lay out provisions to protect your business from risk and clarify each party’s obligations. When you rely on a competitor’s contract, you expose your business to significant risks because their contract is designed for their business, not yours. If you use terms which do not fit your operations, you might end up with obligations that do not align with how your business works. This misalignment can confuse your customers and cause unnecessary risks. Instead of protecting your business, you could set yourself up for problems you could avoid with a tailored contract. 

The contract could also miss out on vital bespoke provisions you need – for instance, obligations you need your customers to comply with to deliver your services. Or, the competitor’s terms may not have bespoke post-termination restrictions, which you need to protect your staff from being poached by a client. 

You May Face Legal Risks

Using a contract not explicitly drafted for your business opens you up to legal problems. Your competitor’s contract might not include clauses that cover legal requirements specific to your industry or business; for instance, they may not include mandatory clauses necessary for compliance with UK GDPR or other regulations. If you ignore these requirements, you could face enforcement action.

Additionally, copying a contract without permission might expose you to copyright infringement claims, leading to legal consequences. Instead of protecting your business, you might accidentally invite legal claims against you.

Your Reputation Could Be at Risk

Copying a competitor’s contract can damage your reputation. Errors, outdated information, or irrelevant terms in the agreement can make your business look unprofessional. Clients and partners might question your attention to detail and commitment to quality. Public embarrassments, including irrelevant clauses in your contract, can seriously damage your credibility. Copying a contract might harm your business’s reputation rather than enhance it.

You Might Not Understand Your Obligations

You might not fully understand the terms even if you copy a contract from a similar business.

For example – what if the competitor’s terms guarantee services will be delivered within a specific timeframe, but your business fails to comply with those timeframes? This could mean you face customer complaints and potential breach of contract claims.

How Can Working With a Solicitor on Your Contracts Help?

Given the risks of using a competitor’s contract, a bespoke contract is essential for protecting your business and should be a top priority. A well-drafted, bespoke contract will help reduce the likelihood of disputes by clearly setting out each party’s rights and obligations. By preventing misunderstandings and ensuring everyone is on the same page, you can help protect your business relationships and avoid costly legal battles.

Working with a professional commercial contracts solicitor to draft your contract offers several key benefits, such as:

• a solicitor will take the time to understand your business’s specific needs and ensure that every clause in your contract serves your best interests;
• a solicitor will draft niche and critical clauses, such as limitation of liability provisions, to protect your business from specific risks. This is the most vital clause to protect your business from risk and can significantly impact your overall financial liability to your customers;
• a solicitor will ensure that your contract complies with all applicable laws and regulations, giving you legal protection and peace of mind; and
• a solicitor will tailor the contract to suit your business relationships and future-proof it by including clauses that anticipate legal changes or unforeseen events.

As such, it is a good idea to work with a solicitor to draft a watertight contract to protect your business now and in the long run. While it may seem an investment compared to copying another company’s contract, investing in a professionally drafted contract could save you significant time and costs overall.

Key Takeaways

Using a competitor’s contract might seem convenient, but it exposes your business to significant risks where a lot could go wrong. These risks include misalignment with your business needs, exposure to legal problems, reputational damage and customer complaints and disputes. A bespoke contract, drafted by a solicitor, will ensure that your contract aligns with your objectives, provides proper legal protection, and complies with all relevant regulations, safeguarding your business now and in the future.

If you need legal advice or help with a contract, our experienced contract lawyer can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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