How to Write a Contract: 9 Step To Follow

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,036 reviews

Jump to Section

Need help with a Business Contract?

CREATE A FREE PROJECT POSTING
Post Project Now

Why Is a Contract Important?

Learning how to write a contract is an important part of owning a business. A contract is a legally binding agreement between two or more parties entering into an exchange of value, typically the sale of goods or services. It outlines the obligations and responsibilities of all parties and holds them accountable to the original agreement. A contract is a vital part of any business transaction as it locks in the terms of the transaction and protects both parties if the terms are not met.

When to Use a Contract

Before learning how to write a contract, it's a good idea to consider whether the transaction even requires a contract. Consider these factors:

  • Does the transaction involve the purchase, rental, or lease of goods, such as a car or house?
  • Does the transaction include the business hiring a new employee or entering into a partnership?
  • Does the exchange include the sale of intellectual property, such as a computer program or a book?
  • Is the buyer agreeing to pay for services rendered, such as hiring a construction crew for a major project or a cleaning crew to come in several times a week over the long term?

Any of these situations, and many others, require the use of a contract to make sure all parties understand their roles and responsibilities. Remember, a handshake agreement between two parties, even close friends or family, typically won't hold up in a court of law if a dispute arises or any parties forfeit their end of the agreement.

Steps for How to Write a Contract

Follow this step-by-step guide for how to write a contract that's enforceable by law.

Step 1

Go over any notes from discussions with the other parties about the details of the transaction. Ask questions, if needed, to ensure clarity among everyone.

Step 2

Select a contract type and begin drafting the agreement. Include the names of each party in the introductory paragraph, as well as contact information for all parties involved. Be sure to also state the start date of the contract and when it expires.

Step 3

Next, add a detailed list of any key terms and definitions that appear throughout the contract. This helps prevent any ambiguities and clarify vagueness. For instance, for simplicity, the contract writer may use the words "Work Product" throughout the contract in reference to the goods or services on offer. However, it's important to define from the start the exact goods and services that make up the "Work Product."

Step 4

Define the complete scope of work involved in the business transaction. Start with the deliverables, then discuss the roles and responsibilities of each party. This includes any goods or services the seller must provide and any payments the buyers must make. There's no need to use legalese. Keep the language simple, succinct, and easy to understand. This helps reduce ambiguity and misinterpretation. However, remember to provide as much detail as possible.

Step 5

Outline the payment terms. Include specifics about when payment is due and how to make the payment. Be sure to also include a project schedule that clearly outlines any deadlines for all parties. This is also a good place to note any performance incentives or deductions for missed deadlines.

Step 6

Provide details about the protective terms of the agreement, such as what happens if any parties breach the contract. Also include liability, confidentiality , dispute, termination, and ownership statements in this section if they apply.

Step 7

Give each party time to review the contract and negotiate the terms. Make sure everyone feels comfortable with the details and understands any obligations and expectations. Continue to revise the contract as many times as needed to get it right.

Step 8

Once all parties agree to the terms of the contract, an authorized representative of each party must sign and date the contract. Signatures make the contract legally binding.

Remember, oral contracts rarely stand up in court, so include every aspect of the agreement and get it in writing. When learning how to write a contract, remember to use simple language and clear terms. Following the steps highlighted in this article and including as much detail as possible helps ensure the contract holds up in a court of law if any parties breach the terms of the agreement.

Types of Contracts

Before writing up a contract agreement, business owners need to know about the different contract types. There are three main types of contracts, and each one serves a unique purpose. Read this article to learn more about different types of contracts .

Fixed-Price Contracts

This type of contract works well when buyers know what they want and provide a clear scope of work. The seller then creates a fixed-cost estimate for all labor, materials, and anything else required to complete the work. Fixed-price contracts offer minimal risk to buyers since they know the total cost of the project at the start.

Cost-Plus Contracts

When the buyer does not know exactly the work involved in the project, a cost-plus contract works well. The buyer agrees to pay for the actual cost of any labor and materials involved in getting the work done. This type of contract poses some risk to the buyer since the cost of labor and materials may fluctuate throughout the life of the project.

Time and Materials Contracts

Similar to cost-plus contracts, time and materials contracts offer a solid solution when the buyer cannot provide a clear vision for the project. The seller agrees to do the work based on a fixed rate for any time spent and materials used to complete the project.

Sometimes, business owners need to combine different types of contracts to cover all parts of the transaction.

Writing a Contract Agreement

When writing a contract agreement, it is necessary to state all terms and provisions clearly and succinctly to help reduce the risk of dispute over ambiguities. It is also a good idea to think about all aspects of the business transaction, such as any potential risks, and include contingency plans about how to deal with risks within the contract.

What to Include in a Contract

Before writing up an agreement contract, it is important to consider the following information:

  • The date the contract begins and when it expires
  • The names of all parties involved in the transaction
  • Any key terms and definitions
  • The products and services included in the transaction
  • Any payment amounts, project schedules, terms, and billing dates
  • How to handle missed deadlines, incomplete work, breach of contract, damages, and disputes

Not including enough detail is one of the most common mistakes people make when writing a contract agreement. When in doubt, include as much detail as possible and write it in simple terms. Here is a link to sample contracts that provide insight into how to write out a contract and what to include in the contract.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Seth S. on ContractsCounsel
View Seth
5.0 (2)
Member Since:
September 30, 2020

Seth S.

Attorney
Free Consultation
Get Free Proposal
New York
9 Yrs Experience
Licensed in NY
Touro Law School

I am an attorney admitted in NY, with over 6 years of experience drafting, reviewing and negotiating a wide array of contracts and agreements. I have experience in Sports and Entertainment, Real Estate, Healthcare, Estate Planning and with Startup Companies. I am confident I can assist you with all of your legal needs.

Rishma E. on ContractsCounsel
View Rishma
5.0 (1)
Member Since:
October 1, 2020

Rishma E.

Attorney-at-Law
Free Consultation
Get Free Proposal
Miramar, FL
9 Yrs Experience
Licensed in FL
St. Thomas University School of Law

Rishma D. Eckert, Esq. is a business law attorney who primarily represents domestic and international companies and entrepreneurs. A native of both Belize and Guyana, she remains engaged with the Caribbean community in South Florida: as a Board Member and General Counsel for the Belize American Chamber of Commerce of Florida, and Member of the Guyanese American Chamber of Commerce. She holds a Bachelor of Laws degree (LL.B.) from the University of Guyana in South America, a Master’s degree in International and Comparative Law (LL.M.) from Stetson University College of Law in Gulfport, Florida, and earned a Juris Doctor degree (J.D.) from St. Thomas University School of Law in Miami, Florida. Licensed to practice in the State of Florida and the Federal Court in the Southern District of Florida, Mrs. Eckert focuses her passion and practice on domestic and international corporate structuring and incorporation, corporate governance, contract negotiation and drafting, and trademark and copyright registrations.

Kiel G. on ContractsCounsel
View Kiel
5.0 (1)
Member Since:
October 2, 2020

Kiel G.

Principal
Free Consultation
Get Free Proposal
Hollywood, FL
6 Yrs Experience
Licensed in FL
Florida State University

Founder and Managing partner of Emerald Law, PLLC, a business law firm specializing in contract drafting and corporate transactions. Kiel worked as in house counsel for a variety of companies before launching his own firm, and most recently served as the Chief Legal Officer for an international private equity firm.

Jane C. on ContractsCounsel
View Jane
5.0 (58)
Member Since:
October 8, 2020

Jane C.

Attorney
Free Consultation
Get Free Proposal
New York
18 Yrs Experience
Licensed in CT, DC, NY
Pace University School of Law

Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.

Jarrett S. on ContractsCounsel
View Jarrett
5.0 (2)
Member Since:
October 14, 2020

Jarrett S.

Startup Attorney
Free Consultation
Get Free Proposal
Marietta, Georgia
15 Yrs Experience
Licensed in GA
Emory University School of Law

I work with early stage startups (in Georgia and internationally) with their formation, contract, patent and investment needs.

Maxwell L. on ContractsCounsel
View Maxwell
4.9 (4)
Member Since:
September 24, 2020

Maxwell L.

Lawyer, Owner
Free Consultation
Get Free Proposal
New Berlin, WI
12 Yrs Experience
Licensed in WI
Marquette University Law School (JD)

Firm rated best ADR firm for Wisconsin and won an award for cultural innovation in dispute resolution from acquisition international magazine in 2016 and it was rated "Best of Brookfield" by Best Businesses in 2015. Attorney Maxwell C. Livingston was rated 10 best in Labor & Employment Law by American Institute of Legal Counsel and 40 Under 40 by American Society of Legal Advocates for 2016; he also won 10 Best by American Institute of Family Law Attorneys. He is licensed in Wisconsin in all state and federal courts, and in the 7th Circuit Court of Appeals, wherein he won a landmark decision in McCray v. Wielke.

Bryan B. on ContractsCounsel
View Bryan
4.8 (56)
Member Since:
October 1, 2020

Bryan B.

Lawyer
Free Consultation
Get Free Proposal
Austin, TX
7 Yrs Experience
Licensed in TX
Penn State Law

Experienced attorney and tax analyst with a history of working in the government and private industry. Skilled in Public Speaking, Contract Law, Corporate Governance, and Contract Negotiation. Strong professional graduate from Penn State Law.

Melissa L. on ContractsCounsel
View Melissa
4.7 (1)
Member Since:
October 26, 2020

Melissa L.

Attorney
Free Consultation
Get Free Proposal
Des Moines, IA
15 Yrs Experience
Licensed in IA
City University School of Law

Seasoned negotiator, mediator, and attorney providing premier legal advice, services, and representation with backgrounds in education, healthcare, and the restaurant and manufacturing industries

Richard E. on ContractsCounsel
View Richard
Member Since:
October 1, 2020

Richard E.

Senior Partner, Attorney
Free Consultation
Get Free Proposal
Dallas-Fort Worth
15 Yrs Experience
Licensed in TX
Juris Doctor – University of LaVerne College of Law

Richard is a wizard at taking on bureaucracies and simply getting the job done. His clients value his straight-forward counsel and his ability to leverage a top-notch legal staff for efficient and effective results. Richard is a professional engineer, professor of law, and has been named among the top 2.5% of attorneys in Texas by the Super Lawyers®. When he is not driving results for his clients, Richard can be found with his small herd on his Texas homestead.

Mark A. on ContractsCounsel
View Mark
Member Since:
October 1, 2020

Mark A.

Attorney
Free Consultation
Get Free Proposal
Jacksonville, FL
19 Yrs Experience
Licensed in FL
University of Florida

Mark A. Addington focuses his practice primarily on employment litigation, including contractual disputes, restrictive covenants (such as non-competition, non-solicitation, or confidential information restrictions), defense of wage and hour, harassment, retaliatory discharge, disability, age, religion, race, and sex discrimination.

Benjamin M. on ContractsCounsel
View Benjamin
Member Since:
October 26, 2020

Benjamin M.

Attorney
Free Consultation
Get Free Proposal
Atlanta, GA
11 Yrs Experience
Licensed in GA
Georgia State University

Experienced Attorney focused on transactional law, payments processing, banking and finance law, and working with fintech companies with a demonstrated history of driving successful negotiations in technology sourcing and transactions and strong understanding of government contracts and the procurement process

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call