Drafting of Contracts and Agreements: Everything You Need to Know
Drafting of contracts and agreements is important for anyone wanting to enter into a new contract with another party. There are several tips that one should follow when drafting the initial contract. 3 min read
Drafting of contracts and agreements is important for anyone wanting to enter into a new contract with another party. There are several tips that one should follow when drafting the initial contract. Keep in mind that all contracts go through a negotiation phase whereby the parties will meet and discuss the terms and provisions to ensure the parties are fully aware of their rights and responsibilities under the contract.
Some of the tips you should follow when drafting a contract or agreement include the following:
- Prepare an outline
- Be clear and concise
- Be consistent
- Include recitals
- Define terms
Prepare an Outline
Before you even begin drafting the contract, you should have an outline ready to review with your attorney. The attorney will need to review the outline to understand what you are expecting to achieve by entering into the contract. What is the contract for? Is it for the sale of goods? Is it for services? How many other parties are involved? What will be the duration of the contract?
While the outline won’t be utilized to draft the actual contract; it will be used to understand what should be included in the contract, and the expectation of the party you are writing the contract for. Such issues in the outline might also be addressed with the other party before drafting the actual contract to prevent any misunderstandings or disagreements.
Be Clear and Concise
It is crucial that the contract is both clear and concise. Any complexities or ambiguities could cause significant legal issues down the line. To avoid this, the contract must be clear in that the parties must understand what is expected of them. They must know when payment should occur, how it should occur, what happens if a legal dispute arises, what happens in the event of a breach, what could happen if an unforeseeable event takes place, etc.
Furthermore, use conjunctions very carefully. Words like and, or, and but can be confusing to some people, so it is best to confirm with both parties the use of such terms and their meanings with respect to the language being used in connection with these terms.
Being concise is also important. Remove unnecessary wording or phrasing. This will provide a thorough, yet condensed version of a contract that is easily readable to both parties.
Be consistent in terms of the language being used in the contract. For example, if you define the term “seller,” then you should ensure that any use of that term has the same meaning as it does throughout the rest of the contract.
Recitals are those sections of a contract that begin with “whereas” that identifies the intent of the parties entering into the contract. Although not required, this can be especially helpful for a judge if a legal suit arises. Specifically, such language will identify what is to be done under the contract, i.e. the performance.
All terms should be identified in the contract. For example, if there are complex terms that one of the parties might not understand, it is best to define it as clearly as possible. Even such terms like “profits” should be defined, i.e. gross vs. net profits. Similarly, if the contract involves the sale of property, it should clearly identify the property so that an unknown third party knows which property is involved in the contract.
Avoid Complex Wording
Avoid complex language altogether. Not only might it create confusion for one or both of the parties, but such complex wording generally leads to legal disputes. While one party might have an advantage over the other in terms of business size and industry knowledge, the goal of any contract is to have a meeting of the minds where both parties understand what is expected of them. And this includes the wording used in the actual contract. An example of this would be using industry language that one of the parties doesn’t know. For example, construction-related terminology is generally something not known to most lay people; therefore, if you are entering into a contract with a non-specialized individual who knows nothing about this industry, then you should only use terms that are known to the other party.
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