Key Takeaways

  • Draft Contracts: A draft contract is a preliminary version of an agreement that outlines the terms before final approval.
  • Elements of a Valid Contract: Every contract must include an offer, acceptance, consideration, lawful purpose, and mutual consent.
  • Contract Drafting Process: Drafting requires defining terms clearly, ensuring legal enforceability, and incorporating necessary clauses.
  • Types of Draft Contracts: These include service agreements, partnership contracts, and employment agreements.
  • Common Mistakes: Omitting key terms, unclear language, and failing to outline dispute resolution processes.
  • Legal Review: Consulting an attorney can help ensure the contract is enforceable and protects both parties.
  • Negotiation and Finalization: Parties can modify draft contracts before finalizing them through mutual agreement.

Some business owners want to know how to draft contracts. A contract is an agreement that two or more parties enter into that is legally binding and enforceable by a court. “Parties” to a contract can be individuals, business entities, or other institutions. The subject of a contract is typically the exchange of some type of goods or services. A contract must include all relevant information about the exchange. Essentially, anyone can draft a contract on their own; an attorney is not required to form a valid contract.

What Are the Elements of a Valid Contract?

In order for a contract to be legally valid and binding, it must meet certain requirements. Contracts are generally governed by the law of the state where the agreement was made. However, contracts for the sale of goods are governed by the Uniform Commercial Code (UCC)—standard guidelines that govern commercial transactions.

At its most basic level, a contract forms when one party offers to exchange something of value to another party, who then accepts. To expand, there are some core elements that every contract must incorporate to be considered valid:

  • Contractual intent
  • Lawful subject matter
  • A valid offer
  • A valid acceptance
  • An exchange of an item that has value
  • A written document (in certain circumstances)

Common Types of Draft Contracts

Draft contracts can take different forms depending on the nature of the agreement and the involved parties. Some of the most common types include:

  • Service Agreements – Contracts between service providers and clients, outlining deliverables, payment terms, and timelines.
  • Employment Contracts – Agreements defining employer-employee relationships, including job roles, salary, benefits, and termination clauses.
  • Partnership Agreements – Contracts between business partners that specify ownership structure, responsibilities, and profit-sharing.
  • Sales Contracts – Agreements governing the sale of goods or property, detailing pricing, delivery terms, and warranties.
  • Non-Disclosure Agreements (NDAs) – Contracts ensuring confidentiality between two or more parties regarding sensitive information.
  • Lease Agreements – Legal agreements between landlords and tenants outlining rent, property maintenance, and lease duration.

Each type of draft contract must adhere to legal requirements to ensure enforceability.

Offer

The first step of forming a contract is for one party to make an offer. Before another party accepts the offer, there are a few situations that could play out. For instance, the offeror could revoke the original offer before the other party accepts. For a revocation to be considered legal and not a breach of contract, it must occur before there is any kind of acceptance. If the other party accepts and the offeror subsequently revokes their offer, it will be considered breach of contract. Similarly, if the offeror agrees to keep the offer open for a certain period of time—also known as an “option contract”—the offeror cannot revoke the offer until that period has ended.

The other party could also reject the offer completely or make a counteroffer. A counteroffer becomes the new offer, and the original offeror must either accept, reject, or make another counteroffer.

Acceptance

Accepting a contract is fairly straightforward. There are a number of different ways a party can communicate their acceptance:

  • Verbal or written acceptance
  • Performance of the exchange
  • Promise to perform
  • Partial performance

How to Write a Valid Contract

To begin writing a contract, make sure to include the basic information about the exchange. The contract should include the names of the parties involved, the date the contract will go into effect, and a description of the goods or services to be exchanged.

The provisions of a contract should be written in specific language, and the terms should all be well defined. Any ambiguity will only result in misunderstandings or disputes between the parties, which can increase the chances of litigation. The terms of the exchange should be written in detail. If the contract will govern the sale of goods, it should describe the goods (color, size, make, model, etc.), how many are to be exchanged, and the total asking price. It should also describe when and where the goods are to be exchanged.

The parties to a contract are always free to modify its terms, as long as they both agree to those changes. If they wish to do so, they must attach a written addendum with their signatures and date and attach it to the original contract.

It is a good idea to include a termination clause. A termination clause will dictate how the contract will terminate and how long the contract will last. If the contract covers a one-time exchange, the termination clause should state that it will end upon completion of the transaction. If the contract is governing an ongoing relationship, the termination clause can stipulate how many days are required if a party wishes to terminate the contract.

A contract should always include what happens in the event a party breaches the contract. Depending on if a court deems a breach minor or major, there is usually some form of remedy available to the non-breaching party.

Common Mistakes in Drafting Contracts

When drafting a contract, avoiding common mistakes is crucial to prevent legal disputes. Key pitfalls include:

  1. Vague Language – Ambiguous terms can lead to differing interpretations and potential disagreements.
  2. Missing Key Terms – Essential details like payment schedules, deadlines, and scope of work should be explicitly stated.
  3. Failure to Include a Dispute Resolution Clause – A well-drafted contract should specify how disputes will be handled (e.g., mediation, arbitration, or litigation).
  4. Lack of Termination Provisions – Contracts should outline how either party can exit the agreement legally.
  5. Ignoring Compliance Requirements – Contracts should adhere to applicable laws and industry regulations.
  6. Failure to Account for Future Modifications – Including an amendment clause ensures that changes can be made with mutual consent.

Ensuring clarity and completeness in contract language helps prevent misunderstandings and legal issues.

Steps to Finalizing a Draft Contract

Finalizing a draft contract involves multiple steps to ensure its accuracy and enforceability:

  1. Internal Review – Parties involved should carefully examine the contract to ensure it aligns with their expectations and requirements.
  2. Legal Review – Consulting an attorney ensures compliance with laws and protection of interests.
  3. Negotiation and Amendments – If necessary, modifications are made based on mutual agreement before signing.
  4. Signing and Execution – Once finalized, all parties sign the contract, making it legally binding.
  5. Storage and Compliance – Keeping a record of the signed contract ensures easy reference in case of future disputes.

A well-drafted contract protects all involved parties and minimizes risks.

Frequently Asked Questions

.1. What are draft contracts?

       Draft contracts are preliminary agreements outlining terms before final approval and signing by all parties.

 2. Why is contract drafting important?

       Proper drafting ensures legal enforceability, reduces ambiguities, and protects the interests of all parties involved.

 3. Can I draft a contract without a lawyer?

      Yes, but consulting a lawyer ensures the contract meets legal requirements and prevents potential disputes.

 4. What should be included in a draft contract?

      Key components include the parties’ details, scope of agreement, payment terms, timelines, dispute resolution clauses, and termination provisions.

5. How can I modify a contract after drafting?

      Contracts can be modified through mutual agreement by adding amendments with the consent of all parties

If you need help drafting a contract, you can post your legal needs on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.