Contract templates vs. custom contracts: pros, cons, and when to use each

Contracts are an important part of protecting your business and making sure everyone involved is on the same page and legally protected. This is true for when you’re signing with a new client, hiring a contractor, or beginning a business partnership.

But deciding whether to use a ready-made contract template or invest in a custom contract can be a tough decision.

In this article, we’ll talk about everything you need to know about contract templates and custom contracts, including the key differences, benefits, drawbacks, and when to use each one.

Let’s go!

What is a contract template?

Simply put, a contract template is a standardized document intended to be used repeatedly in common business scenarios. These templates include pre-written legal language and structure that are easily used across various agreements. 

The idea is that you can simply plug in unique and/or relevant details to the specific situation, like names, dates, payment terms, and deliverables, and then it’s all set to go.

Contract templates are useful for routine agreements like:

• – Freelance or contractor agreements
• – Non-disclosure agreements (NDAs)
• – Sales contracts
• – Lease agreements
• – Employment offers
• – Editor contracts
• – Service-level agreements (SLAs)

They are typically made by legal professionals and then vetted by appropriate legal teams, so they have low risk in minimally complex scenarios.

To get a better idea, here are ten simple, one-page templates you can use for a variety of agreements.

What is the purpose of a contract template?

These documents are made to smooth out the contract creation process. Because you can use them to draft agreements quickly without the need for legal support, you’ll reduce legal costs while maintaining consistency across all your agreements.

They are especially useful if you frequently use similar types of contracts, since they will speed up the process and minimize errors/omissions.

Check out our contract template library to get started on yours!

What is a custom contract?

Custom contracts are created from scratch, or at the very least significantly modified to meet the needs of a specific agreement. These documents are typically drafted and/or reviewed by an attorney to make sure all nuances of the relationship are accurately expressed in the language.

Custom contracts are often used in situations like:

• Strategic partnerships or joint ventures
• B2B sales deals high in value
• Licensing agreements or intellectual property transfers
• Long-term vendor or service agreements with unique terms
• Agreements that involve multiple jurisdictions or complex regulations

What is a custom contract used for?

When your situation falls outside of the typical bounds of a business deal, custom contracts are the way to go. These situations could be anything from negotiating exclusivity rights to dealing with sensitive data or sharing proprietary processes.

Regardless, your agreement needs to fully address the risks, expectations, and responsibilities of both sides. When the stakes are high or an agreement involves complex details, a custom contract allows you to have more control and legal clarity.

Ready to build your contract from scratch? Check out our guide on how to create a contract.

Is a contract template better than a custom contract?

This really depends on the situation and your business needs. Here’s a brief comparison of the two options:

What is the difference between standardized and customized contracts?

The biggest difference between these two types of contracts is how adaptable they are to a specific scenario. Let’s break that down:

• Standardized contracts (templates) use a consistent format and are intended for repeat use. They use boilerplate language that can apply to a lot of different situations. 
• Custom contracts are built from scratch or heavily modified templates. They are intended to address very specific details, terms, and clauses based on whatever deal is on the table and the preferences of the parties involved. 

Convenience, cost, ability to customize, and legal precision are all factors you need to consider when deciding which option is right for you.

When should I use a contract template instead of a custom contract?

You’ll want to use a contract template when:

• You’re dealing with a common, low-risk agreement, like hiring a freelancer or signing an NDA
• You use the same type of agreement often
• You want or need to move quickly through a deal and want to avoid legal counsel 
• You want to keep costs down while having a legally sound option
• You want consistent formatting and language across all of your documents

When paired with contract customizing tools, like those that come with PandaDoc, templates can be highly effective as they allow you to change key terms where needed while keeping the core structure intact.

When should I choose a custom contract over a contract template?

A custom contract is best when:

• You’re working with a high-stakes deal that involves significant risk
• There are non-standard or complex terms and/or conditions that need to be clearly spelled out
• There are long-term commitments, intellectual property, or regulatory requirements involved in the deal
• There’s a higher risk of legal disputes or misunderstandings
• You want greater legal protection 

Sometimes, a template doesn’t fully reflect the complexity of your agreement, so a custom contract may be safer, depending on your situation. That way, you’ll know the agreement will hold up in court, given you have it vetted by proper legal counsel.

Enhance your contracts with PandaDoc

If you understand the difference between custom contracts and templates, you’re likely to save your business time, money, and potential legal headaches.

With PandaDoc, you can go with a template, a fully custom contract, or even a hybrid of both. Our software makes it super simple to generate, send, and manage your contracts, making sure they are legally sound and meet your exact needs.

The best part? It will speed up your entire sales process by optimizing the contract management process. It does this by finding bottlenecks and transforming document data into actionable insights.

Plus, you can check contract statuses in real time and be reminded of contract renewal dates, helping you to stay on top of important deadlines.

Still need convincing? Just ask our client, Remofirst, who needed a solution that automated contract generation and seamlessly integrated with their CRM. Their reps were losing valuable time every day creating contracts. With PandaDoc’s standardized templates, they now save 15 minutes per proposal while significantly reducing errors.

“PandaDoc has changed how we approach contracts, not just in terms of efficiency, but in the quality of the decisions we’re able to make. We can actually spot trends and adjust our strategy based on what the numbers are telling us. That kind of visibility is priceless for a volume-driven business like ours.”

– Christopher Ginty, Director of Revenue Operations at RemoFirst

Ready for better, more efficient contract management? Request a free demo today.