Advantages of contract templates in contracting process
Online contract templates are fast becoming the norm in business as more and more businesses have started to see the advantages of contract templates to improve their processes.
Whether it is drafting a hire purchase agreement, signing a vendor agreement, or making a master service agreement (MSA), a lot of essential legal paperwork is now available as online contract templates. As such, the number of companies now choosing paperless legal forms that are easily accessible online continues to grow.
Advantages of using contract templates
Companies that opt for contract templates tend to enjoy many benefits, from quicker contract creation to happier and more satisfied shareholders. Investing in contract templates can also drive a positive return on investment for many businesses because departments that use contracts for their day-to-day activities can focus on more critical business functions while dealing with high-value contracts.
However, online legal templates can have some disadvantages, especially if business owners and employees misuse them. Picking just any online contract template may result in legal or financial disputes. And some templates may also be outdated, incorrect, or unsuitable for your industry.
By strategically using contract templates, the process of contract management can be streamlined, further increasing customer satisfaction and promoting corporate efficiency.
1. Reduces time to draft contracts
Centralizing your contracts with templates means you don’t have to draft contracts from scratch each time. Instead, you can use a standard contract template to enter into business agreements with various parties.
In the long run, using contract templates speeds up the contracting process, meaning contract creation takes hours instead of days or weeks.
Standardization also reduces revision time because there’s no need to waste time revising each contract. Instead, you can use the templates repeatedly according to your business needs.
2. Reduces redline rate
Contract redlining mainly occurs during the contract negotiation phase, which is when all involved parties revise a contract with terms that satisfy their specific business needs. As a result, the process can take even longer when the parties cannot agree on a set of terms.
With standardized contract templates, parties don’t draft contracts from scratch. Predefined contracts for different roles and stakeholders make the editing and negotiation process smoother. In turn, businesses that opt to use contract templates enjoy redline solutions that make it easier to track and modify changes. Decision-makers and project stakeholders can comfortably draft contracts that meet everyone’s needs.
3. Reduces transaction costs
The need for custom contracts for every business agreement can significantly increase the cost of the contracting process. With standardized contracts, there’s no need to create custom contracts for every business agreement.
For example, rather than redline contracts for every new customer that signs on to, say, Netflix, the Legal team would organize the contracts so that the high-volume, low-value agreements are automated, and the high-value agreements get the focus they need.
Contract templates can also reduce legal costs, as every contract is created more efficiently. Using a defined structure can reduce external counsel spending because you don’t need Legal to review every contract. Instead, with contract templates, Legal can spend more time on high-value contracts.
4. Provides consistency in contracts
It is easier to meddle with the contract terms in the traditional, hard copy contracting process. Such actions can damage the reputation of a business or employer. And customers may end up signing unfair contracts that don’t serve their best interests.
Standard form contract templates offer consistency in the contracting process, preventing stakeholders from changing contracts without notifying all parties.
Contract templates create consistency by facilitating constant form and structure, making it easier for your team to quickly find essential aspects within a template. You can easily update the terms of standard contracts to meet emerging business or customer needs.
5. Increases flexibility
Contract templates enable teams in HR, Legal, Procurement, Finance, and Operations to modify the content of templates to suit their business needs. Being able to use similar templates for different clients ensures seamless business operations. Teams can scale up their contracting processes by modifying terms to match their current business needs.
Disadvantages of using contract templates
1. Failure to edit boilerplate text
It is important to regularly review boilerplate clauses to ensure they continue to meet external and internal compliance requirements. If you decide to use a template you find online, it will likely contain boilerplate text that isn’t suited for your particular use.
For example, a contract template may fail to include an arbitration clause, which means that your business will be more susceptible to class action suits.
2. Can expose a business to liability risks
Departments should regularly review their contracts to ensure legal compliance. Contract templates that aren’t regularly updated may expose a company to legal and financial risks. A standard contract should include all necessary federal and state policies to ensure stakeholders aren’t exposed to legal liability.
Companies that create legal documents may sometimes upload and forget about their forms. Essential terms may become invalid or outdated, despite the continued use of such templates.
Using contract templates strategically
Every company needs contracts to do business. The advantages and disadvantages of contract templates are matters that Legal and their partners in Marketing, Operations, Procurement, Human Resources, and Finance should consider in all of their business relationships.
With pre-formatted contract templates, you can reduce internal costs and risks. Online contract templates can help save your business time in the contract creation stage, and in the contract process as a whole. Not to mention how it can help you reduce your redline rate and speed up so many internal processes.