In our digital information age, “online” is the first place many of us go with a tricky question like, “What year did Elvis enter the Army?” (A: 1958) or “Are there alternatives to the ‘Cone of Shame’ for my pooch who just had surgery?” (A: Yes – in fact, there are many good alternatives; my dog liked the ProCollar™ best). How about “What form of business entity should my new company take and which documents should I use to create and manage the entity?” (A: It depends. Only by applying legal knowledge to multiple factors can this be answered.)
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Unenforceable Online Legal Form Exposes Company to Potential Liability
In order to speak intelligently about online legal forms, I obtained one. To protect the not-so-innocent, I’ll withhold the name of the form provider and will not share their proprietary information here.
Here’s my take on the form agreement the site allowed me to generate:
I obtained a non-compete agreement that was ostensibly meant for use in my state. The agreement was well-formatted and had good-sounding legal language in it. But, the agreement is unlikely to be enforceable in most circumstances and could expose a company using it to legal liability.
First, the agreement completely lacked legal consideration (at least as to current employees), but I was allowed to create it anyway. The site also made no distinction between using the form with current employees vs. new employees or with high-level vs. lower-level employees. The site made no mention of the possibility that forcing current employees (especially lower-level ones) to sign this or face termination could expose my company to a claim of wrongful termination.
Let’s face it, non-compete agreements with employees are enforced only in a narrow band of circumstances as it is. These circumstances are based upon the reasonableness of its provisions and the employee’s role within the company. Despite that, this form generator allowed me to insert a limit of 5 years and a 500 mile radius and did not require me to specify the role of the employee who would be signing it. Not only is it highly unlikely this form would be enforced, but just using it could be construed as unconscionable or an unfair trade practice, leading to liability for the company.
The form generator allowed me to input information without any guidance or parameters. It did not warn me that my choices would not be enforceable or may expose me to legal liability.
Instead of providing legal judgment to guide me, the online form provider merely disclaimed that it was providing any legal advice and allowed me to DIY to my own detriment (thankfully, the form I created will never see the light of day).
Can Online Legal Forms Be Trusted?
I was skeptical of agreements created by these forms providers to begin with; it turns out my skepticism was warranted. The above anecdote aside, are any online legal forms valid and enforceable? I believe it’s safe to say there are some that are. The difficulty isn’t necessarily with the form agreements themselves, but with the context in which they are used.
There is a lot of stock language available online for little or no money, much of it conveniently packaged together in forms. Unlike the form agreement I created, much of it is likely valid and enforceable.
But, of all available legal language out there, which is right for your situation? If you use a form agreement you find online, do you understand what all of it means? Is there language in the form that should be excluded (or additional language that should be added) so that the agreement makes sense for your situation? The answers to these questions depend on factors that can’t be answered by stock form providers.
While online research can be very helpful to finding answers to simple questions for which there are discrete answers (Elvis. Army. 1958.), it cannot exercise the judgment necessary to determine which contract language, out of the vast universe of available options, will work in a particular situation. Exercising legal judgment is what lawyers do every day.
Running contract questions past a business lawyer typically costs far less than entering into agreements that may not provide what you expect them to. If you don’t know a trusted business lawyer in your area, ask around.
The rest of this series on online legal forms will discuss the legal advice provided by online form providers and the pitfalls of uninformed use of standardized language.
Disclaimer Covering my bases: There is no legal advice contained in this post. Legal advice entails applying the law to specific facts. I don’t know what your facts are and any resemblance to them here is purely coincidental. Instead, this post is meant to provide general information, which may or may not be complete and accurate. If you need legal guidance, please feel free to contact me using the contact information on my firm’s web site – www.salberglaw.com.