The startup legal paradox
Whilst everyone is aware of the role the law plays in daily life, it really only steps into view when something goes wrong. This could be a query from your local tax office or a dispute with an employee, but the most likely reason you would have any dealing with the law is with customers in relation to what your business does on a day to day basis. In a software as a service context, this will generally be in the realm of contract law, either with a custom contract for a specific deal/customer or through your general website/service terms and conditions
With a background in Law, I have an understanding of the need for tight legal documents when it comes to contracts. It is all very well copying a generic website T&C document but when it comes to actually relying on a specific clause, you want to make sure you’re fully covered. This is particularly important when it comes to the availability of software as a service, especially if it is providing critical infrastructure like our server monitoring product, Server Density, does.
Just like doctors, lawyers are expensive. To become a lawyer in the UK (and elsewhere) takes a long time and a lot of money. Not only do you usually have to complete a degree (law or otherwise), there are many years of professional qualifications before you can even start dealing with clients. Anyone who has dealt with lawyers will know that the hourly fee depends on the level of experience of the person – paralegal, associate and partner – and the experience really does make a difference.
And this is the paradox – you need to ensure you have all your bases covered before you start signing up customers (it’s awkward to change T&Cs after the fact), this is expensive and you won’t have the money to spend on legal fees until you have customers.
I never get the accountants in before I start up a business.
You could wing it and buy a cheap set of T&Cs from somewhere like Clickdocs. They won’t be custom, you won’t really understand what they mean (you have nobody to explain them to you) and if it ever comes down to relying on them, you better hope they were drafted correctly and you know which clauses to use. But they’re cheap and you can get all your customers to agree to a new set later on.
Or you could engage a lawyer to draft them for you. You will be able to spend time explaining your exact requirements to ensure that everything is covered, you can get explanations of what each term means and if you need to rely on them, you can have more faith that they’ll stand up in court.
For businesses that aren’t just an extremely simple website, I would always recommend the latter. It’s probably 10x more expensive than buying from the likes of Clickdocs but for £500-£800 you can get legal peace of mind. It’s a high cost, but only in the short term. If you’re running a long term business then that set of T&Cs will last and could save you £100,000s in legal fees should you ever have to go to court.
“Easy for funded companies, I don’t have the money!” you might exclaim. Boxed Ice is bootstrapped and I got our T&Cs drawn up for the launch of Server Density before I’d even applied to Seedcamp. Our lawyers (Orrick) understand this and deferred payment for 6 months. Good law firms look to the long term and by then you should be generating sufficient revenue to cover their fees.
“It’s fine, I’ll copy someone else and write them myself!” you might suggest. No. Only a fool represents themselves. T&Cs are completely ignored until it comes to rely on them, when they will be scrutinized to a level you wouldn’t believe. When that happens you want to be sure they are well drafted!
