Any organization should know how to write a contract template. A handshake isn't considered a contract, and with a formal agreement, everything should go as intended. The contract template should include terms and conditions along with the specifics of timeframes, payments, processes, and how disagreements will be addressed.

Developing a contract template isn't easy. First, you may consider getting some advice, either from an attorney or a professional organization. To start you off, here are some great tips on how to write a contract template.

Four Basics Every Contract Should Contain

According to the Judicial Education Center of the University of Mexico, all contracts should have four basics.

  • Offer: one party to the contract must promise to do something (or not do it)
  • Consideration: this details the exchange of goods or work for money
  • Acceptance: both parties agree to the terms
  • Mutuality: both sides agree to the conditions and agree they have entered into a contract

Let's look closer at these sections.

The Offer

The offer is the promise. Define the promise between both parties in the situation. That's the first step, and once you have completed it you should proceed to consideration, which is the most important part of a contract template

Consideration

For there to be consideration, something of value must be exchanged. Consideration is likely to be services, cash, physical goods, or intellectual property. This must be detailed, otherwise it's not enforceable. It also has to be adequate, meaning the contract can't say one party will purchase a property from another way below its value.

Further, it must be in concise, easy-to-understand language. Each of the considerations should be its own paragraph. Should there be a dispute that goes to court, the judge will determine the outcome based on the interpretation of the contract by the average person.

If services are part of the consideration, this should be documented and described. This should include specifics on who will do what, where, and when.

Acceptance

Acceptance is not only an agreement is in place, but that all parties understand the agreement. Before going to your contract template, all parties should already have a consensus of what's going to occur. Finally, mutuality means each party accepts the terms of their own free will.

Mutuality

When writing the contract, be sure all parties fully understand it and don't need further interpretation. This is key to achieving the mutuality necessary for the contract to be enforceable.

What Specifics Should be Defined?

When creating a contract template, it's important to include sections for specifics, as nothing should be left to chance, which may include defining key terms. Other specifics to be defined for template consideration include:

  • Information for all parties
  • Beginning and end date of the contract
  • Product or service to be provided
  • Payment terms
  • Due dates
  • Milestones
  • Fees or interest for late payments
  • Insurance/liability requirements
  • How any dispute about the contract will be settled
  • Special conditions

Legal Information to Include in the Contract

While much of the contract can be written in layman's terms so that all parties understand it, it will require some legal language. These would include:

  • Name the parties: “This contract is between Party A and Party B”
  • Full legal name: the business' complete legal name should be included (e.g. LLC or Inc.)
  • Individual names may need to be added as well along with titles

When Do You Need a Formal Contract?

When discovering how to write a contract template, it's a good idea to have some parameters around what types of agreements need a formal agreement. With an exchange of anything of value, including services, labor, intellectual property, or materials, you need a contract. There are, however, times when an informal contract is acceptable.

Informal Contract Templates: Letter of Agreement

For some situations, you may be able to use an informal contract. An example is a Letter of Agreement (LOA), which can be used for freelancers you hire. An LOA is a simple letter using regular language and detailing a specific list with actions. While these are easy to create, be aware they aren't as legally airtight as a contract.

Nondisclosure Agreement Template

Another popular contract is a nondisclosure agreement (NDA), used by companies when they hire employees, contractors, freelancers, or other parties. An NDA template should protect your company's interests from those with access to proprietary information, confidential data, or intellectual property. It's best to have an NDA template ready for a variety of situations to keep parties protected.

Learning how to write a contract template is necessary in the world of business. A well-written contract is specific and leaves little to chance. If you need help with a contract template, post your legal need on the UpCounsel jobs board today.