Standard Form Contracts: Are They Legal?

Standard form contracts are ubiquitous in today’s society. Almost every business, organization, or government entity relies on them to establish and govern their relationships with their clients or customers. But are these contracts actually legal?

The answer is yes, but with several caveats.

Standard form contracts are legal as long as they are not unconscionable, unfair, or against public policy. In other words, they cannot be one-sided or oppressive, and they cannot violate any laws or regulations. If a standard form contract is deemed unfair or illegal, it can be challenged and potentially invalidated.

One example of an illegal aspect in a standard form contract is a mandatory arbitration clause that waives a customer’s right to a trial by jury. This clause is often buried deep within the contract, making it difficult for the customer to notice or understand. Some courts have found that mandatory arbitration clauses are illegal because they violate the customer’s constitutional right to due process.

Another example is a non-compete clause that prevents an employee from working for a competitor after leaving their job. Non-compete clauses can be deemed illegal if they are too broad or lengthy, or if they prevent an employee from earning a livelihood. Some states have also enacted laws that restrict or invalidate non-compete clauses in certain industries or situations.

It’s important to note that standard form contracts are not illegal simply because they are standardized. In fact, they can be beneficial for both parties by streamlining the negotiation and agreement process. However, it’s important for businesses to create fair and legal contracts that take into account the needs and interests of their clients or customers.

In conclusion, standard form contracts are legal as long as they are fair, legal, and do not violate any laws or regulations. As a professional, it’s important to ensure that businesses create contracts that are clear, understandable, and comply with legal requirements. By doing so, they can establish and maintain positive relationships with their clients or customers while protecting their rights and interests.