There is no such thing as a Standard Contract

As a lawyer who represents a wide variety of clientele, from medium to large scale businesses and individuals, I am occasionally confronted with the odd client who would say things like, “This is a pretty standard distribution agreement, right? So why do we need to review it?” or “Why do we need to take so long to look into this joint venture agreement? Isn’t this pretty much a standard contract?

In my 12 years of experience, I have not come across two contracts or agreements that are exactly the same.

It is always good to remember that contracts and agreements, once signed are binding on all parties. You can’t plead ignorance nor can you say that you did not understand the consequences of agreeing to such terms.

Some companies, in a bid to save on legal cost, use “standard” contract templates that they obtain from the Internet. Here’s the problem with such contract templates they do not cover specific situations that are unique to you and your situation.

For example, jurisdiction. The laws applicable in the United States or even Hong Kong for that matter, may not be entirely applicable here in Malaysia. If you have an incompatible clause in your agreement, it will make the litigation process rather cumbersome and costly for you.

Another scenario- You enter into a business sale agreement for the sum of RM 500,000.00. There is an arbitration clause in the said agreement. An arbitration clause is a clause that requires parties to settle their disputes through the arbitration process. A dispute arises and you then have to consider taking the matter to Court. That arbitration clause will necessitate the matter to be heard by an Arbitrator.

Now, arbitration is an excellent alternative to litigation but if the value of your contract is RM 500,000 and below, it may also be a very costly affair to have it heard through the arbitration process. A better alternative would be to have a general clause for dispute resolution under the laws of Malaysia where parties may have the matter heard, in this case, the Magistrates Courts where your legal cost is much lower.

The key points to take away from this is:

  • There is no such thing as a standard contract;
  • You are entitled to negotiate the terms of a contract you wish to enter into based on your own circumstances;
  • Investing in legal advice, negotiation, and drafting of a contract or agreement will reduce risk and save you a lot of legal cost in the long run.