How to Make a Legal Contract: Everything You Need to Know
legally enforceable deal between two parties that involves the exchange of goods or services for compensation.3 min read
2. Legal Contract Fundamentals
Updated November 26, 2020:
Legal Contract Overview
If you are wondering how to make a legal contract, then you are wondering about how to create a binding, legally enforceable deal between two parties that involves the exchange of goods or services for compensation. Although some believe that all contracts must contain complex legalese that only lawyers understand, in truth most contracts only need two elements to make them valid, and these are:
- That all parties are in agreement to the terms expressed. Ideally, the terms will be expressed in writing and the agreement will be expressed with dated signatures and perhaps a third-party witness, but oral contracts are also possible, although they are more difficult to enforce.
- That items of value are exchanged. These could include money, goods, services, or intellectual property. Generally, the exchange will be for items of perceived equal value to the parties involved, although this does not have to be the case.
Contacts may vary a great deal in the finer details that they express, but the above two points will form the backbone of any valid contract.
Legal Contract Fundamentals
Legal contracts may vary a great deal in the finer points, depending on what is deemed necessary for the contract, but there are some basic considerations that should be made for any contract, and these include:
- Are all possible contingencies covered? A common downfall of many contracts is not considering all possible scenarios for contract failure, of which there are many. For this reason alone, consulting an attorney well-versed in contract law when drawing up a contract is highly recommended.
- Has all ambiguity been eliminated? Vagueness of language is another major cause of contract failure. To that end, clarity in the writing of provisions and the definition of terms should be the main goal in the construction of a contract. Even such details as the names of the parties involved should be double-checked to make sure a party does not escape liability on a technicality.
- Has the exchange been sufficiently detailed? What goods or services are to be provided and for what compensation should be covered in detail. The precise nature of the goods or services should be stated, along with the exact method and amount of payment, including a payment schedule if it is not a one-time payment.
- Have addenda been considered? Addenda are not necessary for a contract, but they may be used to clarify a detail or add a point of agreement if it was forgotten at the time of contract creation or it would be cumbersome to include it in the main body of the contract. Such addenda can be included at the time of contract creation or even after signing, so long as both parties sign off on the addition of the addenda.
- Has a confidentiality clause been considered? A confidentiality clause, or non-disclosure agreement, may also be useful, depending on the nature of the contract. If trade secrets or other confidential information must be revealed for the completion of the contract, a confidentiality clause can ensure that this sensitive information is not revealed to third parties, lest the contract be breached and the door be opened for legal action.
- Has a termination clause been inserted? The length of the contract is an important detail to include. If the contract is for a one-time service or exchange, the contract will terminate upon completion of that exchange, yet the contract should nonetheless specify this as being so. If the contract is for an on-going service or exchange, then the date of termination should be stated. In either case, scenarios or events which may allow for premature contract termination should be stated, as well as if the contract may be terminated without cause (usually with due notice being given).
- Has the contract been constructed in accordance with the law? A contract that does not conform to the laws within the jurisdiction where it is to be enforced will be deemed void and unenforceable if it is challenged in court. Therefore it is important to make sure your contract abides by all laws applicable to it. It is also important to note that no legal contract can involve illegal services or goods.
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