How A $12 Contract Can Cost You $80,000 Or More, Part 2

How LegalZoom’s General Agreement Affects You

Now that you have the building blocks, what do you do with them?  Well, you actually have to go start constructing the General Agreement.  So, what’s your plan of action?

Although the LegalZoom Guide offers some instruction, it is simply not enough to guide you through the contracting process.  Case in point, the Guide explains the Obligations provision of the General Agreement as follows: “Th[e] obligation may be to perform a service, transfer ownership of property, or pay money.”[1]  Okay, this gives you a general definition of what an obligation is.  Fine.  But then, LegalZoom continues: “There is a blank space in which you should describe the obligations of the … party to the agreement.  Will specific materials be used?  Is there a time limit?  Include any information you think is important.”[2] 

Great.  Best of luck to you.  By allowing you to have a free-for-all in drafting obligations, LegalZoom creates a situation where too many ideas can get jumbled together in one paragraph.  Consequently, this generates a high potential for unclear and potentially conflicting provisions, making your contract ambiguous.  That is one term you never want to hear.  If someone ever asks you—What did you mean by X, Y, and Z?—guess what…you have an ambiguity problem! 

The ambiguity problem lies at the heart of what I worry about when you use LegalZoom to draft a contract.  This problem exists when an outsider (like your attorney) can interpret the contract many different ways or hasn’t a clue as to what you meant at all.  More worrisome is the fact that courts interpret contracts against the drafter, which would be you. 

To avoid this mess, I prefer to have one concept per paragraph, with like material sequenced together.  To this end, if LegalZoom really wanted to help you, then, at the very least, it should have listed a series of questions (the who, what, when, where, and why) for you to answer, each answer becoming a topic of its own numerical paragraph. 

This is the bare minimum.  Among other things, you also should ask yourself the dreaded question—Where would you like to be sued?  Seriously.  You have the power to set forth the location and procedure regarding how to resolve conflicts arising from the contract.

One of the glaring defects of the General Agreement is, if you eliminate LegalZoom’s arbitration provision, you are missing a clause dictating where disputes should be brought, i.e., a forum selection clause.  And although it acknowledges this defect in the Guide, LegalZoom doesn’t give you the language to resolve this problem.  This lack of forethought leaves the problem to be resolved by the attorney you hire to prosecute or defend any claim, costing you $450 per hour if you are lucky.

Ultimately, the construction of the contract must be particularized so that you and everyone else involved have a clear understanding of the expectations, rights, and duties.

~ To Be Continued in How A $12 Contract Can Cost You $80,000 Or More, Part 3 ~

Disclaimer: The information contained in this article is intended to provide general information and does not constitute and is not intended to constitute legal advice.  Further, any analyses of facts contained herein are the mere opinions and interpretations of Erica based upon her viewpoint.  This article is designed to help readers be aware of the dangers of using legal document self-help entities based on the information she obtained from LegalZoom on May 10, 2012; thus, the information and materials contained in this article may be invalid or outdated. The content provided is not warranted or checked to ensure that the content contained herein is up-to-date.

[1] See the Guide, p. 2.

[2] See the Guide, p. 2.

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1 reply
  1. Vanessa and Morgan
    Vanessa and Morgan says:

    Wow… this is really clear information and points out the problems with using what might seem to be a cheap solution to a legal issue. The lesson here is to go to a REAL lawyer and forget the “convenience” and low cost of Legal Zoom or other internet attorneys who might cost you a WHOLE lot more inconvenience and expense in the end!

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