Introduction
Drafting contracts can be a complex and time-consuming process, often involving an intricate web of legal terms and conditions. Contract templates serve as a potential solution to streamline this process, but like any tool, their effectiveness is highly dependent on their usage.
This article explores the many different facets of contract templates, their benefits, potential drawbacks, and best practices for their use.
Defining Contract Templates
A contract template is a pre-formatted document that serves as the blueprint for a contract. It outlines the necessary structure, including the standard terms and conditions of contract and boilerplate clauses, and sections for you to fill in with specific details of the project and the parties.
Benefits of Contract Templates
There are a number of reasons why many organisations put contract templates in place:
1. Efficiency Gains
One of the primary benefits of using contract templates is increased efficiency. Having a pre-set structure enables you to draft contracts more quickly as compared to starting from scratch.
2. Consistency Across Contracts
Contract templates facilitate the maintenance of a uniform structure and language across all contracts. This standardisation aids in reducing potential inaccuracies and omissions.
3. Improved Collaboration
When working in teams, contract templates provide a common platform for collaboration. The shared format aids in ensuring everyone is on the same page, reducing misunderstanding or misinterpretation.
4. Easier Contract Management
Uniform formatting enabled by templates simplifies the process of navigating through contracts. This feature facilitates the search, categorisation, and analysis of contracts, thus enhancing Contract Management. Ultimately, it is easier for Contract Managers to manage and administer a contract that they have worked with before.
Potential Drawbacks of Contract Templates
While contract templates bring several benefits, it's important to be aware of potential pitfalls that might arise due to improper use.
1. Lack of Understanding
If not used correctly, contract templates can become a crutch. They can lead to a false sense of security, causing Professionals to overlook the importance of understanding the content they are generating. There is a tendency to think that, just because it has been drafted and approved for use, everything in the template is appropriate for your particular project - however, this may not be the case.
2. Over-generalisation
While templates provide a helpful starting point, each contract often requires specific tailoring to suit the unique context. Over-reliance on templates may lead to a lack of customization, potentially resulting in contracts that do not adequately address the specifics of the deal.
3. Complacency
The ease of use of templates could lead to complacency, causing individuals to overlook potential errors or omissions in contracts.
Best Practices for Using Contract Templates
1. Understand Your Contract
The effectiveness of a contract template is maximised when the user fully understands the content. Ensure that all team members comprehend the clauses, conditions, and legal implications within the contract template.
2. Customise Your Templates
Understand that templates are a starting point. They need to be customised and reviewed to fit specific projects or industries, taking into account unique requirements or risks.
3. Continuous Learning
Keep abreast of changes in laws, industry standards, and organisational policies to update your templates accordingly. A contract template is a dynamic tool that needs to be refined continuously.
In my Experience...
I have drafted contracts from scratch, drafted templates and precedents and used templates and precedents for 23+ years now.
I've seen dodgy templates that I wouldn't wish upon my greatest adversary, with clauses that didn't make sense, risk allocation that was inconsistent, errors and inconsistencies in the clauses in the document, and even incorrect use of templates (eg using a Managing Contractor Contract Template for a simple Goods and Services Contract).
I've also seen some really good templates that I would be happy to use over and over again.
Rachelle Hare
Ultimately, the success of using contract templates is contingent on the knowledge and skill of the user. They can be a powerful tool in the arsenal of a seasoned Contracts Professional who understands the intricacies of contractual language and can adapt the template to the nuances of a specific deal.
However, a contract template is not a magic solution to contract creation. In the wrong hands, over-reliance on templates without a proper understanding of their content can lead to sub-optimal contracts and potential legal vulnerabilities.
The take-home message? Use contract templates as a tool to enhance efficiency and consistency, but never let them replace comprehensive understanding, customisation, and diligent review in the Contract Drafting process.
Some advice for you - when you find a good template, stick with it. And if you are told to use a template that is not fit for purpose, raise questions and concerns until someone does something about it (usually calling in a Lawyer to fix it). That's one thing I do in my business as The Contracting Consulting - I've available to organisations to help them fix up their contract templates where their Legal Division doesn't have the capacity, or the knowledge in particular instances.
Regardless of how well a template has been drafted, it is critical to ensure that you and your team fully understand the content of the template and know how the template is supposed to work. It's also important that you receive proper training from your Legal Division on how you should use (and fill in) that template properly, and when you should call in your Lawyer to advise on specific issues.
Conclusion
Contract templates can be powerful tools to enhance efficiency and consistency in contract creation, provided they are used correctly. They serve as a foundation upon which to build contracts, rather than an end-all solution. Remember, the ultimate goal isn't merely to streamline processes, but to create comprehensive, enforceable contracts that protect your organisation's interests.
FAQs
A contract template is a pre-drafted document that outlines the general structure and clauses of a contract, providing placeholders or variables where you can insert specifics. It serves as a starting point to aid in the consistent and efficient creation of contracts without having to draft them from scratch each time.
Contract templates save time by providing a standard format, eliminating the need to draft each contract from scratch. You simply need to replace placeholders and variables with specific details for each contract.
Since contract templates provide a uniform structure, language and risk allocation, they ensure all contracts maintain a standardised format that is (ideally) designed for the particular organisation. This promotes professionalism and reduces the likelihood of errors and omissions.
If misused, contract templates can lead to a lack of understanding, over-generalisation and complacency when it comes to drafting contracts. They can cause Contracts Professionals to overlook the importance of fully understanding and customising the content of contracts, leading to potential inaccuracies or omissions.
5. How can I use contract templates effectively?
To use contract templates effectively, you need to ensure that you understand the content of the template. Use the template as a starting point, but be sure to customise it to fit the specific circumstances of each contract. Stay updated with changes in laws, industry standards, and your organisation’s policies to keep your templates relevant and compliant. If you have a Legal Division, they should do this for you. Make sure you ask for training on how to properly insert the variables in the contract template, and how to compile a completed contract from all of the Contract Documents.
6. Do contract templates replace the need for Legal review?
A: Contract templates should not replace legal review. They provide a basis for contract creation, but each contract should still undergo a thorough review to ensure it is accurate, legally compliant and fit for purpose. If you develop a good relationship with your Lawyer, you can grow together to a point where you only need to get advice from your Lawyer on unusual issues or high-risk items.
7. Can anyone use contract templates?
A: While anyone can use contract templates, their effective use requires a comprehensive understanding of contract terms and legal implications. It is best to have a Lawyer on hand to advise as needed, as well as significant experience in the relevant industry if you are a Contracts Professional when using templates for contract creation.
