Writing a Contract: Your Detailed Guide
Anyone may need to create a contract at least once in his or her life. And then, this task seems to be impossible if you have never done it before.
Of course, contract writing is not a very difficult task but it requires certain skills and practice. Writing it from scratch is not that easy.
So below, we have provided some helpful tips and described that process step-by-step for your convenience.
The Definition of a Contract
A business contract or agreement provides detailed terms and conditions for two (or more) parties. It should contain a clear description of services or products to exchange, describes sales and proposals. The duration of such a partnership is also a must for any contract or agreement.
The contract, first of all, is aimed to prevent any disputes. In case a dispute arises, those terms and conditions will define solutions and remedies, as well.
What Should Be Included in a Business Contract
As in any task, it is important to start with the preparation and think of the details to be included in your agreement:
- The names of all the parties;
- Services, products, goods to exchange;
- The payment amount and schedule;
- What actions are to be taken in case the terms are not complied by any of the parties;
- The start and end date of the agreement.
Things to Consider
Before you start writing your contract, you should consider the following things:
- The ability of each party to participate in the agreement;
- Every party is older than 18 years;
- If any of the parties is under 18, it should have a parent or a guardian who will sign the contract for that party;
- Each of the parties is capable to understand the contract;
- Each of the parties is mentally healthy and sober.
Now as you know where you should start and what things to consider when creating a contract, you can start the process of writing. Follow our guide step-by-step and it will help you write an efficient contract and avoid all common mistakes.
Basic information first
At the very beginning, you should include the date at the top of the page and the names of the parties. As a rule, it looks like that:
This contract is made between Party 1 and Party 2.
Make sure to state the name, description, and the business name if an individual is signing an agreement on behalf of a business.
The items to exchange
Now you should specify what items the parties are going to exchange during the contract period. Make sure it to be written easily so an average person could understand it. The language has to be concise. The following items are to be included:
- Payment. The payment methods, amount to pay and due dates are a must;
- Description. The items must be described in detail. So make sure to include their size, make, mode, color, material, weight, delivery date, and all the important details. The item is not necessarily a product; it can be a property or a service, so in these cases you should state the location and legal details of the property and the details of the services to be provided: the name of the person who is delivering the services, for whom, and where the service is being delivered. Also, state how long it will take to deliver it.
The confidentiality clause
The confidentiality clause is a must if the subject of exchange is a business secret or intellectual property. The other party or parties should not share the information with others who may be involved in the contract while it may affect the business, profit, etc.
The confidentiality clause is a sort of agreement that may not be disclosed. You may use it to protect any confidential information. It also helps to prevent the other party from providing the services or products during the contract period if necessary.
The dispute resolution
If any dispute occurs or any of the parties breaches the agreement, these terms should be clearly specified. You should make it clear who is bearing the cost of the court and attorneys, as well as other fees. It would be good to state the state and district to settle the dispute.
Usually, every party pays for the attorneys on its own if the dispute arises. But the losing party may be required to pay the cost of the losses to the winning party. So your contract also should contain that information.
A faster way to resolve the disputes between the parties is an Alternative Dispute Resolution. So add such a clause to your contract. It helps keep the good reputation of both parties from being harmed due to public litigation. Such a dispute resolution includes arbitration, mediation, and negotiation.
The termination of the contract
Here you should clearly write the duration of the business agreement. There are different types of contracts and the end date depends on it. If you agree about a one-time exchange of services, the agreement is terminated after the transaction is done, for example. If it is ongoing cooperation, state the terms applicable to all the parties.
Write clearly what actions are considered such that break the contract, as well as in what period of time – one month, a week, etc.
If there are no violations of the terms, the contract still can be terminated via mutual agreement of the parties. For example, if all the services are provided and everyone is satisfied and there is nothing left to do. Then your agreement can be terminated automatically.
The parties’ signatures and dates
There should be enough space left for the signatures and date of your contract at the end of it. Keep in mind that all the states and countries have different laws applicable to contracts, so yours should be concluded in accordance with that.
After you finished writing your contract, you should hire a lawyer. A lawyer will review it and ensure it is written properly and according to the law. If something is written improperly, the lawyer will help improve it.
Now as your contract is absolutely ready and reviewed by the lawyer, you can send it to a party or parties to sign. Usually, parties discuss all the terms and conditions verbally before preparing the contract, so if everything is ok, another party will sign it and return it to you immediately.
Another party should have enough time to check everything and see whether everything suits its expectations. So not to wait forever, it is reasonable to include the deadline by which the other party would sign the contract. Otherwise, it would be considered to be rejected.
More Tips and Details
There are some other things you may need to know before sending your contract for the signature to another party. And here they are:
- Offers/counteroffers. Another party may send you a contract back and offer a counteroffer which you have to study very carefully. Don’t accept it at once, consider every point of it. Accepting it would mean that you will need to adjust your contract to meet the new offer. Such offers and counteroffers may be sent a couple of times before parties reach the agreement.
- Negotiation. Both parties should benefit from signing the contract, so negotiation is a good way to reach it.
- Liabilities and legal remedies of disputes. You have to be satisfied with all the terms and conditions and be aware of every paragraph and its meaning. Don’t sign something if you don’t have enough knowledge about it.
- The contract should be beneficial for you and your business and not bear any losses. Before signing it, read everything carefully a couple of times, especially after making changes from both sides.
- As it is signed, you are legally obliged to follow its rules. Remember that you can always revoke the offer until the contract isn’t signed by both parties. Once it is done, both parties are legally bound by obligations.