Free legal contracts are highly useful for small business owners. They reduce the need to hire expensive contract attorneys to write a specialized contract while protecting the small business owner from future legal issues with clients and employees. However, many contract templates are imperfect and unforeseen problems can arise from their use.

1. Unconscionable Contract

Because free legal contracts are non-specific to any business and general to all business, there is the potential for a contract to be deemed unconscionable by a court proceeding. A contract can be deemed unconscionable if it is determined that the contract favors one party's rights over the other party's rights (due to by misrepresentation or fraud). Simply stated, if you use a legal contract that is so general as to be unclear to the party you're contracting with, it could be, even if unintentionally, an unconscionable contract. Keep in mind that an unfair or unconscionable contract is unenforceable in court, as well.

2. Adhesion Contracts

An adhesion contract is a contract that, without chance of being amended, must be signed by a client or employee if they want the service or the job being offered to them. If they don't sign, then they are essentially saying they don't want to do business with you. Because you are not a lawyer and you don't write a legal contract yourself, you may not even realize that the contract you're offering is an adhesion contract. Furthermore, a free legal contract may fall under the term adhesion contract if it contains terms that are not clearly negotiated at the time the contract is signed. This is also indicative of the party offering the contract having a bargaining power that the client or employee does not have.

3. Out of Date Contracts

Another problem with free legal contracts of the type that you find online is that many times the forms are out of date. What this can mean is that at a future date, often during litigation, you may discover that your use of an old form with old language or unlawful terms and conditions is completely invalid. By doing your research and possibly paying a small fee to download a current contract template, you can save yourself from a whopping legal headache down the road.

4. Differing State Laws

Especially in the case of employment contracts, but in other types of contracts as well, laws governing the contracts change from state to state. But, guess what, the downloadable contract templates are all pretty much the same. Again, do your research to make certain that the contract you are entering into is legal, lawful and binding before you request or give a signature.

While free legal contracts can save your business time and money in the short run, unforeseen problems arise from using general contracts that are not specific enough, are outdated or violate a law particular to your state of residence.