Key Takeaways

  • Knowing how to draw up a contract helps prevent disputes by clearly defining parties’ rights, duties, and remedies.
  • Either party, an agent, or an attorney may draft the agreement, but laws vary on whether dual agents are allowed.
  • Essential elements include parties’ names, scope, payment terms, deadlines, signatures, and optional clauses like inspections or contingencies.
  • Best practices for contract drafting include using plain language, organizing sections logically, and customizing clauses to fit the deal.
  • Contracts are legally binding only when they include offer, acceptance, consideration, mutual consent, and legality of purpose.
  • Businesses often benefit from templates but should tailor them carefully to avoid gaps or unenforceable terms.
  • Professional legal review can ensure enforceability and compliance with state or federal law.

Wondering how to draw a contract agreement? Whether you're buying or selling a home, a purchase agreement (sometimes called a contract agreement) is one of the most important steps in securing the deal. A purchase agreement is a written document that lays out the terms of the sale.

Usually, the seller's real estate agent is the person who provides the purchase agreement. Occasionally, a home is listed for sale by owner (FSBO), and therefore, the owner doesn't actually have real estate agent representation. This usually occurs when the market favors sellers and when the seller intends to maximize their profits by avoiding agent commission fees.

Who Draws The Contract Agreement?

The question remains: if the buyer and seller agree on a sale, who will be responsible for drafting the purchase agreement? In most cases, if the seller doesn't have an agent, the buyer's agent will end up doing the majority of the work. Under these circumstances, the buyer's agent will work as a transactional agent, also called a dual agent. It's best to think of this agent as neither representing the buyer nor the seller, but a facilitator of all necessary documents. However, some states do not permit dual agency, as it may be seen as an ethical dilemma.

If you decide to buy real estate directly from the owner and your agent agrees to draw up the purchase agreement, your agent will need to be paid for their work. This doesn't mean that you must pay the bill. Be prepared to ask the seller to pay that part of your agent's commission. Before you agree on a sale, ask your agent to approach the seller and discuss the possibility of compensation. Often, sellers are willing to pay the buyer's agent if they've brought them a ready and willing buyer.

Essential Legal Elements of a Contract

For any agreement to be legally binding, it must contain certain fundamental elements. Courts generally require:

  • Offer and acceptance – one party proposes terms, and the other clearly agrees.
  • Consideration – each party must exchange something of value, such as money, goods, or services.
  • Mutual consent – both parties must freely agree without coercion or misrepresentation.
  • Capacity – parties must be legally able to contract (e.g., of legal age, mentally competent).
  • Legality of purpose – the subject of the contract must comply with the law.

Without these elements, even a written contract may be unenforceable. When learning how to draw up a contract, make sure these fundamentals are present.

Agreement Terms and Clauses

When drafting a purchase agreement, keep in mind that complicated legal words are not necessary. Clearly and simply state each clause, and include all relevant details. Although not a comprehensive list, make sure to include the following information:

  • Date - Include the full date when the contract was executed.
  • Names of all parties - Make sure to use full legal names. Avoid using nicknames or abbreviated names.
  • Agreement - Also known as the “general scope,” this brief statement explains the basis of the contract. It includes what each party will do for the other.
  • Payment terms - Not only must you include the final cost, but also state the down payment amount and any other repeating or incremental payments related to the sale. If interest is being charged, include the percentage. Make sure to state the date payments will be made and what payment methods will be accepted. If the buyer accepts credit card or PayPal transactions, they may wish to pass on the appropriate fees to the seller.
  • Closing date and other deadlines
  • Additional conditions - Both buyer and seller may wish to add additional conditions to the purchase agreement, such as a home inspection or appraisal. Once again, be sure to include deadlines by which these actions must be performed.
  • Signatures and dates - Leave room for all parties to print and sign their names and date. You may wish to have a witness observe and sign the contract as well.
  • Boilerplate - If you work with an attorney, you may wish to have them add their own boilerplate language at the bottom of the contract. This will help ensure that your agreement conforms to local and state laws. If you don't have an attorney, you can look up boilerplate language for the type of contract you wish to execute by conducting an online search, although it's best to seek counsel from a legal professional with experience in your jurisdiction and contract type.

Drawing up a contract agreement or purchase agreement requires a thorough understanding of your state's contract law, as well as the subject matter and terms of the agreement. Before you start drawing up a contract agreement, it's best to seek counsel from a local contract attorney who can help you determine whether any special considerations must be considered you begin drafting your terms. Depending on the subject matter and substance of your contract, certain federal or state laws may be relevant to your contractual terms.

Best Practices for Drafting a Contract

When preparing a contract, clarity and organization are key. To strengthen your agreement:

  1. Use plain language – avoid unnecessary legal jargon to ensure all parties understand their obligations.
  2. Structure with headings – organize sections like “Payment,” “Termination,” and “Dispute Resolution” so terms are easy to locate.
  3. Be specific – include exact dates, dollar amounts, and responsibilities rather than vague promises.
  4. Address disputes – consider adding mediation or arbitration clauses to reduce costly litigation.
  5. Tailor boilerplate clauses – generic templates can be a starting point, but adjust them for your jurisdiction and transaction.
  6. Review for compliance – check that the contract aligns with relevant local, state, and federal laws.

Following these practices can make your contract more enforceable and help avoid later misunderstandings.

Common Types of Contracts

Contracts vary depending on the type of relationship. Some of the most frequently used include:

  • Real estate contracts – purchase agreements, leases, and rental contracts.
  • Employment agreements – defining roles, compensation, and non-compete clauses.
  • Service contracts – outlining scope of work, deadlines, and payment terms.
  • Sales of goods – setting delivery, warranties, and return terms under the Uniform Commercial Code (UCC).
  • Partnership or shareholder agreements – defining rights and responsibilities in a business entity.

Knowing the contract type helps determine the clauses that must be included to protect your interests.

Using Templates vs. Custom Contracts

Online templates can save time, but they may leave out state-specific requirements or unique provisions important to your deal. Templates are best used as a starting point—not a substitute for legal advice. For complex transactions, customized drafting ensures that no key obligations or protections are overlooked. Consulting an attorney can help you adapt a template into a fully enforceable agreement.

Frequently Asked Questions

  1. What makes a contract legally binding?
    A contract is enforceable when it includes offer, acceptance, consideration, mutual consent, and a lawful purpose.
  2. Can I write my own contract without a lawyer?
    Yes, individuals can draft contracts themselves, but attorney review is recommended for enforceability and compliance.
  3. Do contracts always have to be in writing?
    Not always—some verbal contracts are enforceable. However, written agreements are strongly preferred for clarity and proof.
  4. Are online contract templates reliable?
    Templates are helpful starting points but should be customized to reflect state laws and the specific terms of your deal.
  5. What happens if a contract is missing signatures?
    Unsigned contracts may still be enforceable if performance shows intent, but signatures provide critical proof of agreement.

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