Legal Agreements Overview

Drafting legal agreements is the process of creating contracts for use in business dealings. This is an important skill to have because almost any business activity of significance will require a legal contract. Even if you ultimately decide to engage the services of an attorney for the drafting of your legal documents, it can still be beneficial to have some understanding of the fundamentals involved in the process.

Legal Agreement Fundamentals

Drafting a legal agreement may seem like a daunting task at first, but understanding the basic elements involved will help greatly in simplifying the process. In order to properly draft a contract, it is important to understand the following:

A contract’s basic requirements. Every contract must have the following three elements: an offer, consideration, and acceptance. The offer is the action that the contract is proposing, the consideration is the compensation for the action on offer, and the acceptance is the agreement to act in exchange for the compensation. The offer and consideration may be heavily negotiated before a final contract is arranged but will be agreed upon before a contract can be completed.

Who may participate in a contract. Not all parties may be able to take part in a contractual agreement. For instance, those under the age of 18 may not enter into a contract unless authorized by a legal guardian, and those considered to be mentally handicapped to the extent that they do not understand the implications of what they are signing also may not sign. Contracts made under duress or under the influence of drugs are also null and void. You should also be sure that if a signing party is acting on behalf of another party, they are truly authorized to do so.

What to offer in a contract. A contract is an exchange of value between two parties, but for a contract to be properly written, it must be specific on what is being exchanged. An effective contract could not say, for example: “Jane will agree to do something at some time in exchange for some money from Jake at some point.” It must give exact details on the exchange.

Make a good faith agreement. To finalize a contract, the parties involved will need to agree to terms, and this must be done in good faith, meaning that both sides genuinely want to take part in the agreement. Thus, using threats, deceit, or other underhanded methods to achieve a deal is not acceptable. A meeting of the minds must occur, and then the contract can be signed.

Legal Agreement Writing Tips

For a legal agreement to be effectively crafted, it must not only cover certain essential details, but present them in an understandable manner, as well. To do this, the following considerations may be helpful:

Begin with basic information. A contract should start by stating the date at the top of the page, along with the names of the parties involved. If a party is being represented by another party, the names of the representative should be stated, as well.

Avoid legalese. Although it may be a popular perception that a proper contract should be written in language that only a lawyer may understand, in truth, unless historical precedent requires certain legal terms, clear, concise language is preferable, especially if you don’t have a law degree. Short paragraphs should also be favored, and key terms should be defined.

Use addenda if necessary. Addenda are additional provisions to contracts that may be inserted after the contract has been drawn up or even after it has been signed, so long as both parties agree to the terms of the addenda. Addenda are useful if some detail was forgotten from the contract or if some aspect of the contract needs to be changed.

Consider including a confidentiality clause. Also called a non-disclosure agreement (NDA), these can be useful if the completion of the contract requires the handling of sensitive information. A confidentiality clause will bind the signing party from disclosing information deemed sensitive to third parties, which may include trade secrets and client information.

Adhere to the rule of law. A contract must not violate any federal, state, or local laws; otherwise, a court may consider it null and void. This means that a contract must be drawn up in accordance with all laws, but also not violate any laws in its content. For example, a contract that required a party to engage in some illegal activity would be considered illegal.

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