How to Write a Business Contract: Everything You Need to Know
Knowing how to write a business contract can be very helpful in navigating the business world, as little can be done without the completion and acceptance of such contracts. 4 min read
Business Contracts Overview
Knowing how to write a business contract can be very helpful in navigating the business world, as little can be done without the completion and acceptance of such contracts. A business contract is an agreement made between two or more parties that defines the terms of, and legally binds each party to, the agreement. A business contract may cover such business dealings as:
- Entering into a joint venture or partnership.
- Buying or selling material items or services.
- Buying or selling any kind of real estate.
- Services involving freelancers or independent contractors.
No matter the topic of the contract, written contracts are always preferable because they provide a record of what was agreed to, should the contract be disputed and perhaps be sent before a court of law. Oral, or spoken agreements, may be technically binding, but they are far more difficult, if not impossible, to enforce. One should also be sure they understand every aspect of a contract before they sign it. If one does not understand any aspect of a contract, legal counsel should be obtained.
Basics of Writing a Business Contract
Although business contracts will vary depending on what is being dealt with in the contract, the following basic elements are likely to appear in most contracts:
- Basic information. The contract will start by stating the names and addresses of the parties involved and how such parties will be referred to in the contract.
- The terms. Any pertinent terms used throughout the contract whose definition is useful to state should be stated near the front of the contract, as well.
- The scope of the work or materials clause. A business contract should state what product or service a party will be providing in exchange for a payment or any other form of compensation. The product or service should be covered in specific detail.
- The term clause. This will cover how long the contract will be in effect for.
- The payment clause. This will state what compensation a party will receive for their product or services as well as when it will be received.
- The acceptance clause. What criteria will be administered to deem a product or service acceptable and a sufficient fulfillment of the contract will be set out here.
- The intellectual property clause. If intellectual property is involved, how the rights and usage of this will be handled should be defined, including if any such agreement involving it will be exclusive or non-exclusive.
- The confidentiality agreement clause. If trade secrets or other sensitive information are dealt with in a contract, a confidentiality agreement is recommended to maintain their secrecy.
- The indemnification clause. If there are to be conditions under which one party will not hold the other responsible for any type of injury, physical, financial, or otherwise, then an indemnification clause should cover the terms of this.
- The notices clause. If information pertinent to the contract needs to be exchanged, the proper manner for this exchange should be explicitly stated.
- The entire agreement clause. This will define the overall scope of the entire agreement and define how the agreement may be amended.
- The termination for convenience clause. This states how a contracting party may terminate a contract without penalty, usually by giving due notice and agreeing to pay for any service or product rendered up to that point.
- The termination for breach of contract clause. What conditions will constitute a breach of contract and the penalties for doing so will be stipulated here.
- The force majeure clause. This allows for a party not to be held liable for unfulfillment of a contract if it is caused by forces reasonably believed to be outside the party’s control (often referred to as “Acts of God”).
- The authority and compliance clause. This simply states that the parties have the ability to enter into the agreement and will do so in accordance with the law.
- The choice of law clause. This states what state law or other jurisdictional law the contract in question will be entered under and bound to resolution under.
- Signatures and dates. The signatures of the parties involved and the dates of their signatures should be provided at the end of the contract.
In writing up a business contract with these elements or any other elements, it is not necessary that you use technical “legalese,” especially if you do not understand it. The most important thing is that the contract is clear and specific on what is being agreed to. Short, clear sentences and orderly, numbered paragraphs are preferred. There is no need to make the document impenetrably complex just so it appears impressive.
If you need further help concerning how to write a business contract, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.