Updated: February 8, 2023
When it comes to successfully managing a business, having the ability to draft effective contracts is an invaluable skill. Whether you’re negotiating with vendors, customers, or other important parties, having a well-crafted contract in place can protect your interests and help ensure that everyone involved meets their obligations.
But drafting contracts isn’t something that comes easily–it takes a great deal of attention to detail and the willingness to understand the nuances of legal language.
In this article, we provide an experienced-filled, and easy-to-understand guide on what to include when drafting a contract. For more information, don't hesitate to contact our dedicated Glendale business law attorney Patrick Monahan today!
To learn more about the in's and out's of drafting contracts, contact Monahan Law Firm today!
What Is a Written Contract?
A contract is a legally binding document or mutual agreement between two or more parties that outlines the specific terms and conditions of exchange, typically of goods, services, money, or promise of any combination of these. Each party must agree to the outlined obligations and responsibilities in order to be valid. Usually, contracts are written in order to ensure that all parties involved understand and agree to the same conditions. This would prevent disputes that could potentially arise in the future.
It should also be noted that oral agreements or verbal contracts are also legally binding, though it is recommended to have them in writing for better clarity and enforceability. As such, for any serious or long-term agreements, it’s best to have a written contract. As such, for any serious or long-term agreements, it’s best to have a written contract.
There are many different types of contracts, including those for business operations, employment, construction projects, and real estate transactions. E.g., employment contract, intellectual property contract, etc.
What Are the Elements of a Valid Contract?
For a contract to be enforceable, it must include certain essential elements. These elements are:
- Offer and acceptance: There must be an offer made by one party and accepted by the other to form a contract.
- Intention: The parties must intend to create a legal relationship and have the capacity to do so.
- Consideration: Each party must give something of value in exchange for what they are receiving from the other party.
- Legal purpose: The purpose of the contract must be legal and not illegal or contrary to public policy.
- Capacity: All parties must be legally able to enter into a contract. Minors and those who are mentally incapacitated may not have the capacity to do so.
How To Draft a Contract
This is, perhaps, the most important step in creating a contract. When drafting a contract, be sure to note these steps:
Step 1. Information Gathering
Before you start drafting the contract, it is important to get all the essential information that will go into the document. This includes details such as names of all the parties, dates, services, or goods that will be exchanged. In the legal document, you will have to include the exact words that each party has agreed to and what each is expected to do.
Step 2. List Your Services or Products
Make a list of all the services or products that are included in the contract. This should include details such as delivery dates, payment terms, and any other conditions that must be met. What's not included should be noted as well in a bid to avoid any confusion.
Step 3. Determine Term Length
Decide on the length of the agreement and when it will expire. This can vary, depending on the type of contract you are creating. Many times, contracts are written with a set termination date and/or conditions that must be met before the contract can be terminated. If it happens that a renewal is needed, specify when it should take place and what will be required.
Step 4. Legal Language
The language of a contract should use legal, specific terms that are easily understood by all parties. This ensures that everyone involved knows exactly what the contract entails and prevents any ambiguity or confusion. It doesn't necessarily have to be technical language, but it should be succinct and clear.
Step 5. Lay Out the Consequences
Outline the consequences that will occur if either party breaches the contract or fails to meet its obligations. This liability or damages clause should include specific remedies and any potential legal action that could be taken. Although this can be difficult to determine, it is important for both parties to understand the ramifications of not fulfilling their obligations.
Step 6. Determine Dispute Resolution Terms
Include a clause that states how any disputes between the two parties will be resolved. This should include details of mediation, arbitration, or other methods of dispute resolution. Parties mainly include this dispute resolution clause to first attempt to resolve any disputes, in case of any breach of contract, without having to go through the court system.
Step 7. Create Signature and Date Lines
Create spaces for both parties to sign and date the contract. This is essential as it shows the contracting parties have agreed to all the standard terms of the agreement. If this clause is not included, the contract may not be valid. Other contract clauses that you should also look out for are the confidentiality clause, termination clause, etc.
Step 8. Have a Lawyer Draft and Review the Contract
Generally, in entering any transaction or binding agreement between parties, it is always important to have a lawyer draft the document, notwithstanding the type of contract. This is critical because a lawyer’s expertise in the law and grammar will ensure that the contract provisions meet all legal requirements and is enforceable. A lawyer will possess a fundamental understanding of contract law and be able to include terms that are favorable for your business or identify clauses that are not in your best interest.
Related Content: Essentials to Include With a Master Services Agreement
In the event that the agreement is drafted by you or the other party, it is always advised to have a lawyer review the document to ensure that it is enforceable and legally binding. This way, you are sure that the contract contains all the necessary information and meets all legal requirements.
Call Monahan Law Firm Today!
The drafting process of any legal agreement can be complex and time-consuming, but it is an essential part of running a successful business or entering any transaction. A contract that is poorly drafted or does not meet the necessary legal requirements may not be enforceable and could lead to disputes or other issues. As such, having the necessary legal advice or legal expertise when drafting a contract is essential. At Monahan Law Firm, our experienced attorneys will help you draft an enforceable contract that meets all of your needs and protects your legal rights and interests.
We understand that contracts can be difficult to understand and it is our goal to provide you with the legal advice and knowledge you need for a successful transaction. Reach out to us today at (623) 300-2727 to learn more about how we can help you with your contract needs.