Contract Drafting:
Everything You Need To Know

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Verbal agreements are only as effective as the parties using them. Due to the risks associated with running a business, you must put your contracts in writing. You’ll be glad you did if business disputes arise and the relevant contract comes into question.

The best place to start is by learning more about the process of contract drafting. Here’s everything you need to know:

What Is Contract Drafting?

Contract drafting is a form of legal drafting that involves writing contracts and legal documents. Contracts are legally binding documents that contain terms and conditions and other provisions. Poorly drafted contracts may result in unintended legal consequences, whereas well-structured ones can support profitable and secure business activities.

4 Requirements for a Valid Contract

The contracts your company uses will determine its success. Well-written agreements will protect your company’s rights and offer contingencies when things don’t go as expected. However, you must write a valid contract to utilize these benefits.

The four requirements for a valid contract are as follows:

Requirement 1. Offer

An offer is an acknowledgment that one party makes to the other. It signifies their ability and desire to carry out the contractual obligation. Offers usually include products and services being sold to an individual or entity.

Requirement 2. Acceptance

Acceptance is the other party’s acknowledgment that they accept the offer’s terms and conditions . Any changes to the existing request will require new acceptance from the receiving party. If they disapprove of amendments to the original contract, the element of acceptance goes unmet, and thus, rendering the contract invalid.

Requirement 3. Intent

Although a willingness to buy and sell falls under offer and acceptance requirements, both parties must intend to create a legal relationship. The element of intent means that they agree to carry out their legal obligations unless stated otherwise.

Requirement 4. Consideration

The exchange of consideration is the final component of valid contract requirements. Consideration is the exchange of something valuable with another entity to carry out the terms of the contract. Making a payment, trading equipment, and offering employee stock options for products and services are examples of consideration.

A signed contract carries several legal implications. Small businesses and startups should routinely incorporate these requirements into their contracts while seeking legal advice when questions arise.

Learn more about legal drafting .

How To Draft A Business Contract – Step by Step

Contract drafting is no easy task. While it may be tempting to download a boilerplate template online, we caution you to avoid making this a regular business practice. A contract is only as good as the language it contains, and a free online template will not satisfy your unique needs.

Here are the nine steps you should following when drafting a business contract:

  • Step 1 . Determine the contract you need since the wrong agreement will not address your transactions’ unique needs.
  • Step 2 . List party names, addresses, company names, and dates at the top.
  • Step 3 . Create a statement that acknowledges both party’s consent to the terms and conditions contained within the contract.
  • Step 4 . Make a list that describes what you give to the other party, such as services, products, and other promises.
  • Step 5 . Draft a paragraph about how the other party plans to pay you for your services or products and the terms by which you will accept it.
  • Step 6 . Insert standard provisions that protect your rights, such as nondisclosure agreements, choice of law clauses , and more.
  • Step 7 . Write a brief statement about how both parties should handle a dispute, such as through traditional civil procedure or alternative dispute resolution
  • Step 8 . Add signature and date lines for both parties to sign.
  • Step 9 . Print or email your business contract for signing.

Poorly written contracts will result in additional problems should you get into a dispute with the other party. Ensure that you select the proper agreement for the given situation and always get legal advice when more advanced questions arise. This strategy is far cheaper than getting sued over unintended terms and conditions in your documents.

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Common Types of Business Contracts

Business contracts encompass a broad range of agreements. Consequently, it’s challenging for many business owners to know where to begin. The good news is that some arrangements are more common than others and may be the same solution that you need to move forward with your business relationship.

Common types of business contracts that your company can use include the following:

Asset Purchase Agreement

Asset purchase agreements (APAs) are contracts that outline the terms and conditions of purchasing a significant asset. These assets don’t include real estate transactions. The APA will protect your rights when purchasing intangible and tangible goods and services from another person or entity.

Consulting Agreement

Consulting agreements specify the provisions surrounding consultation services. These arrangements contrast sales contracts in that they essentially utilize terms and conditions related to the service industry. Consulting work of any kind should incorporate this type of agreement.

Employment Contract

Employment contracts detail the specifics related to their employment. Commonly used provisions related to compensation, dispute resolution, and confidentiality. These contracts are generally offered to new employees fulfilling key roles and positions within your organization.

Nondisclosure Agreement

Nondisclosure agreements (NDAs) restrict employees from divulging company secrets to external parties. These company secrets usually give the organization a competitive advantage. If the employee violates this covenant, the business owner then has the right to file a claim for damages.

Privacy Policy

Privacy policies let consumers know how you handle their personally identifiable information (PII) collected through websites and applications. These policies inform them of their rights, obligations, and how to opt-out of information-sharing efforts. They are commonly used in the technology sector today, and consumers now expect to see them.

Sales Contract

Sales contacts establish the terms of an asset sale. They lay the foundation for the exchange of consideration between a buyer and seller. Common provisions found in the sales contract include purchase price, delivery dates, and remedies for non-performance.

Service Contract

Service contracts offer a buyer and seller legal protections when engaging in a contractor or vendor relationship. Service contracts are different from employment contracts in that there are special rules surrounding these relationships. Check your local employment laws to determine how they affect your organization and contract drafting efforts.

Terms Of Service

Terms of service (ToS) is a contract found on most applications and websites. The software developer or website owner uses them to set expectations. A ToS will also ensure that you limit your legal and financial liability when people use your software.

Who Provides Contract Drafting Services?

Contract lawyers provide contract drafting services. They are the only professionals who are licensed and insured to offer legal advice. For example, lawyers are not allowed to make any legal mistakes, and if they make one in your contract that causes you damages, you can legally pursue a lawyer for a financial remedy.

Can I Draft My Own Contract?

It’s possible to draft your own contract. However, you should hire contract lawyers to draft your contracts for the same reason most people don’t fix their own cars. They will take on the liability of avoid legal mistakes while ensuring that your agreements are valid and enforceable.

If you need help with contract drafting, post a project in ContractsCounsel’s marketplace and get free bids from lawyers to review and compare. All lawyers in ContractsCounsel’s network have been vetted and include peer reviews for you to explore before hiring.

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