How A $12 Contract Can Cost You $80,000 Or More, Part 1

LegalZoom’s $12 Building Blocks

After plunking down the twelve bucks for LegalZoom’s general agreement (the “General Agreement”), I expected it to ask me a few simple questions to get started.  You know, straightforward questions such as what is the contract about—is it about merchandise, a personal service, a piece of property, or what?  After all, LegalZoom claimed that its General Agreement “can be adapted to suit almost any agreement.”[ see footnote 1]; So, I assumed that LegalZoom would make these inquires as the answers alter the course of what written provisions you will need to protect yourself from the other contracting party.  For instance, a personal service agreement will not need a provision regarding what happens when a defective product is received by a buyer as there aren’t any goods, i.e., merchandise, involved.

But LegalZoom didn’t do this.  Instead, I received the generic three-page General Agreement with a few blank spots for me to complete and a five-page General Contract Agreement and Guide (the “Guide”) that supposedly provided “provision-by-provision instructions” in filling out this contract.[see footnote 2]

Okay, I thought…I might as well start with the Guide and see where things went.  Following a brief overview, the Guide provides a “Dos & Don’ts Checklist,” which gives sound general advice to its customers such as review the agreement, sign the agreement, and maintain accurate records.

Nonetheless, LegalZoom embeds the following caveat into this list: “If your deal or agreement is complicated, do not use this agreement.  Contact an attorney to help you draft a contract that will meet your specific needs.”[see footnote 3]  “Wait a minute,” I said to myself…“it’s telling everyone right then and there that LegalZoom’s own agreement will not meet everyone’s needs even though it claims the contrary?”

So, before passing go, you, and only you must determine if your agreement will be too complicated for the likes of LegalZoom.  This places the burden on you to know and identify “all relevant deal points,” as LegalZoom suggests that you include (as would your attorney), and their legal significance.  But you are not an attorney…that’s why you went to LegalZoom in the first place!  So, how will you know what terms and conditions should be clarified before memorializing them in writing?[see footnote 4]

LegalZoom repeatedly makes it clear on its website that it does not help you with identifying what issues need to be expressed in the contract and what terms should be defined to make an effective agreement.  This is all made apparent when LegalZoom doesn’t even ask you those initial questions regarding what type of contract you want.  LegalZoom expressly states in its general disclaimer: “At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation.”[see footnote 5]  In fact, LegalZoom concedes: “The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance.”[see footnote 6]

The basic point is this: You must be confident that the General Agreement safeguards your interest based on your own contractual knowledge.  Because once a contract is in play, the contract binds you to another person or business (i.e., the other party) that is signing the contract.  Accordingly, if any relevant terms or provisions are left out, well…a lot of very scary possibilities can result…anywhere from you having to perform on the contract as is (which may be drastically different from how you imagined it) or extinguishing the contract all together.  The proliferation of potential undesirable outcomes defeats the whole purpose behind an agreement—to create certainty of what is at stake.  With a lawyer by your side who actually understands the issues that arise in your particular business, you can make sure that you are actually protected and that your contract says what you think it says.

As for the rest of the Guide, although it offers a general description of the contract provisions it has selected for you, LegalZoom does not offer any sample language for any substantive portions—the stuff that matters to you—whatsoever.  Hence, again, you must work with what you got.  This segues into our next theme—how LegalZoom’s poorly constructed General Agreement affects you.

~ To Be Continued in How A $12 Contract Can Cost You $80,000 Or More, Part 2 ~

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.