Drafting contracts can be a complicated process if you do not know what they should cover. Parties use contracts to make agreements between parties legally enforceable. They are helpful in business, as a contract enables you to seek compensation if your contracting party breaches the agreement. However, if they are difficult to draft, some companies may want to copy competitor contracts. This article will outline why you should not copy competitor’s contracts and what the consequences are if you do.
What Sort of Contracts Should I Not Copy From My Competitors?
|
Contract |
Description |
|
Terms of Use |
An agreement between yourself and a customer. This contract outlines what service you are providing and the obligations your customers have. |
|
Client Agreement | A contract yourself and your clients agree to. You will use this contract to govern any goods sold to your client. |
|
Privacy Policy |
This contract shows customers what you do with the data you collect from them and how you protect it. |
Legal Issues
The main reason why you should not copy competitor contracts is that you may get into legal trouble. This could be detrimental for your business as it may subject you to court proceedings or fines. The reason why you could get into legal trouble is that the terms of your competitor’s contract may be:
- out of date;
- for a different jurisdiction; or
- not applicable to your business.
For example, if you are using another company’s privacy policy, this may not cover what you do with your customer’s data. If you breach this policy, your customers will be able to sue you for breach of privacy which could open you up to significant damages.
It may also be illegal to use someone else’s contract in certain circumstances. This could be through copyright infringement. Copyright infringement is where you use works that copyright law protects, such as a patent, trademark or copyright. If you are found to be illegally using someone’s copyright you could face heavy fines. The worst thing that can happen to your business is for it to suffer reputational damage because it has not covered all bases. If this happens, your business may struggle to survive.
Continue reading this article below the formDistinguishing Your Business
Another reason why you should not copy competitor contracts is so you can distinguish your business from others in the industry. If your contracts are the same as your competitor, your business will look exactly the same as them. This means that your business will not have a competitive advantage.
You should base your contract contracts on your brand to set yourself apart and make use of them as a legal tool and a marketing tool. One of the contracts that you can use as a marketing tool is your terms of use. A terms of use contract sets out the rights and obligations of those that want to use your service. It is an essential tool as you can personalise it to fit your brand imagery.
Investor’s Issue
If you end up in legal trouble because you have used a competitor’s contract, you could end up having issues with any present or future investors. This is because no investor wants to be involved in a company that is going through legal issues. Indeed, for some investors, it could mean they are personally liable if they are directors on your company’s board.
You may struggle to attract future investors if prior investors have been held liable for not having proper terms in their contracts.
Bad Culture
Using competitor’s contracts also creates a bad culture within your business. If your employees see you doing this, they may find it ok to copy other things such as another company’s intellectual property. This is illegal behaviour and will tarnish your company forever.
Key Takeaways
If you want to protect your company, you have to use contracts. Indeed, contracts are legally enforceable and if your contracting party does not hold up their end of the bargain, you can seek remedies in court. However, it is important when drafting contracts not to copy from your competitors. These contracts will not cover the specifics of your company and may damage your relationship with investors whilst creating a negative culture within the business.
If you need any legal assistance with contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.
Frequently Asked Questions
You can copy the general layout of competitor’s contracts, but you should always make sure the provisions are specific to your business.
Anyone who is in the same industry and sells similar products or services is considered a competitor.
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