How Standard Form Contracts Mitigate Risk and Reduce Overall Transaction Costs

Sixteen years of working with contracts has taught me that whether you are just getting started or you run a long-standing operation, standard form contracts can significantly cut the costs of doing business in ways that may not always be obvious. To start, the amount of time it takes to negotiate and close deals can be drastically reduced by thinking through some of the friction points in advance and providing a mechanism to address those issues before the parties sign an agreement, instead of addressing them for the first time during contract performance. Just a few hours of thoughtful consideration of what could possibly go wrong could save you weeks to months of heartburn associated with managing and resolving conflicts that come up after the fact and that may not be covered under the contract.

Second, having to start from scratch every time you start a new business arrangement can cost you considerably more than you would pay in legal fees and other associated costs than if you already have a starting point for your negotiations. Standard form contracts help you streamline the negotiation process by preparing industry-standard, boilerplate terms in advance so that the negotiation process can focus on discussions around risk mitigation and the specific terms relevant to the work to be done under the contract.

Finally, overall transaction costs are lower when you have a standard form contract because you save an immeasurable amount of time you would otherwise spend managing the contract relationship just by making expectations clear up front and minimizing the risk of ambiguity. There is no better way to manage expectations than to discuss as much as possible up front, which can be facilitated by the use of standard form contracts.