How to Write a Contract

Contracts are the foundation of business. They’re like the rules of the game, making sure everyone knows what to expect and how to play fair. A good contract protects you and your business. This guide will show you how to create contracts that do just that.

The Basics of Contracts

What is a Contract?

Think of a contract as a promise you make with someone. It’s a legally binding agreement between two or more people. It lays out what each person will do and what they expect in return. Contracts can be written, spoken, or even implied by the actions of the people involved.

Important Parts of a Contract

For a contract to be legally valid, it needs these things:

1. Offer: One person (the offeror) makes a clear proposal to another person (the offeree).
2. Acceptance: The offeree says “yes” to the offer. They can agree with words or actions.
3. Consideration: Each person gives something of value in exchange for the other person’s promise. It could be money, a product, a service, or even a promise to do something or not do something.
4. Mutual Assent: Both parties agree to the same terms, like they’re both reading from the same script. It’s like saying, “We’re on the same page.”
5. Capacity: Everyone involved has the legal right to make a contract. This means they’re not underage, mentally sound, or under the influence.
6. Legality: What the contract is about has to be legal. It can’t break any laws or go against the rules of society.

How to Write a Contract

1. Know What You’re Doing

What’s the goal of this contract? What are you and the other person agreeing to achieve? Be specific. This helps avoid confusion later on.

2. Who’s Involved?

Make sure you have the full legal names and addresses of everyone involved. This avoids any “who is this?” questions down the road.

3. Lay Out the Rules

Here’s where you spell out the rights and responsibilities of everyone. It’s like writing a set of instructions. Here are some things to think about:

• Delivery: When, where, and how will things be delivered if needed?
• Payment: How much, when, and how will money be exchanged?
• Performance: What exactly does each person need to do?
• Warranties: Are there any guarantees about the product or service being offered?
• Termination: Under what circumstances can someone end the contract?
• Confidentiality: Are there any secrets that need to be kept private?
• Governing Law: What laws will be used if there’s a dispute?
• Dispute Resolution: How will disagreements be settled?
• Force Majeure: What happens if something out of everyone’s control occurs, like a natural disaster?

4. Keep it Simple

Don’t use fancy legal words or long, complicated sentences. Make sure everyone can easily understand the language.

5. Ask for Help

It’s a good idea to have a lawyer look over your contract, especially if it’s important or involves a lot of money. They can make sure everything is legally sound and protects you.

Key Clauses to Include

1. Entire Agreement

This clause says that the written contract is the only agreement between the parties. It overrules any other talks or understandings before the contract was signed.

2. Amendment

This clause tells you how to change the contract. Usually, both parties have to agree in writing and sign it.

3. Severability

If part of the contract is found to be invalid, this clause makes sure the rest of the contract still stands.

4. Notice

This clause tells you how and to whom you should send important messages about the contract. It usually includes addresses and preferred ways of communication.

5. Waiver

This clause says that if one party doesn’t enforce a part of the contract at one time, it doesn’t mean they can’t enforce it in the future.

Tips for Better Contracts

• Proofread Carefully: Check for mistakes, typos, and inconsistencies. Make sure everything makes sense.
• Consistent Format: Keep the same font, spacing, and layout throughout the contract to make it easy to read.
• Keep it Simple: Use clear and simple language. Avoid legal jargon.
• Avoid Ambiguity: Define terms clearly so there’s no confusion.
• Sign and Date: Everyone involved needs to sign and date the contract to show they agree.
• Keep Copies: Save a copy of the signed contract in a safe place.

Why Are Contracts Important?

Well-written contracts are crucial for any business. They offer these benefits:

• Avoid Disputes: A clear contract makes it less likely that people will disagree or misunderstand each other.
• Protect Your Rights: Contracts provide legal support for your rights and responsibilities, helping you stand up for yourself.
• Save Money: Clear contracts can help you avoid costly legal battles later on.
• Stronger Relationships: Open and honest contracts build trust and good communication between people.
• Clear Expectations: Contracts set clear expectations and responsibilities for everyone, leading to smoother and more predictable relationships.

The Bottom Line

Contracts are an essential part of doing business. By following these steps and including important clauses, you can create agreements that protect your interests and help your business succeed. It's always a good idea to talk to a lawyer if you have any questions or need personalized advice. Remember to tailor your contracts to your specific situation.