Legal documents are signed contracts between you and another person, business, or entity. They safeguard both parties’ rights and obligations while offering some form of recourse if things don’t go as expected. Preparing legal documents can take time, research, and insight, but when done right, it can protect you and your business at the right time.
The article below outlines the most direct method for preparing legal documents and other lawful considerations:
How To Prepare Legal a Document
Have you ever heard the saying that a legal document is only worth the paper it’s written on? This statement still holds true to this day! Even your preparation methods will affect the overall result and should follow a tried-and-true approach.
Here is how to prepare a legal document using a simple, four-step process:
Step 1. Select the Proper Legal Document
Every transaction is unique, which means that your contracts will follow this principle as well. Take a few moments to think about the transaction type. For example, if you’re selling a home, use a sales contract , or if you’re a service provider, offer customers a service contract .
Step 2. Review Your Local Rules and Laws
Contracts that don’t conform to federal, state, and local rules can render the agreement unenforceable, which leaves you legally and financially exposed. Instead of grabbing the first boilerplate template available online, consider the industry, geographic region, and contract laws that apply.
Step 3. Have a Conversation with the Other Party
It’s always a good idea to confirm the terms and conditions with the other party before drafting the agreement. You can also use this conversation to initiate negotiations if appropriate. Ensure that you take detailed notes and reserve them in case questions about your contracts arise.
Step 4. Draft Your Legal Documents
Once you have all the information you need about the transaction, it’s time to put the terms in writing. Get into as much detail as necessary to support the intended outcome of your legal documents.
While you can amend your documents in the future, it is much more efficient to draft the first document from the beginning. It will make you seem very capable and prepared in the process. Capability builds trust and a more secure relationship with your customers.
What Do Legal Documents Include?
Legal documents include the relevant details, terms, and conditions associated with a transaction. However, specific provisions will vary widely across contract types, even basic ones. Ultimately, a contract must contain the provisions that demonstrate an offer, acceptance, and an exchange of consideration.
The general terms and conditions of legal documents typically include:
- Identification of the parties
- Rights of parties
- Duties of parties
- Cost of offer
- Payment terms
- Choice of law clause
- Disclaimers
- Dispute resolution clause
- Severability
- Warranties
- Party signatures
More complicated transactions will use additional provisions. For example, derivatives are financial contracts for underlying assets and require other terms, such as asset class and expiration.
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What Are the Basic Types of Legal Documents?
There is virtually an unlimited number of legal documents that one person or business can prepare. However, some basic types are more commonly used than others and address a broader range of transactions.
The basic types of legal documents include the following:
1. Nondisclosure Agreement
Nondisclosure agreements , also called NDAs, are legal documents that employees agree to keep company trade secrets confidential. Employers use NDAs to give them recourse against acts of unlawful disclosure.
2. Consulting Agreement
Consulting agreements , also called consulting contracts, establish the terms and conditions of a company’s service relationship with an individual or another company. It will detail the services provided and the nature of the consultant’s relationship with the company.
3. Employment Contract
Employment contracts are legal documents between an employer and an employee that specify their employment terms and conditions. A well-written employment contract can benefit both the employer and the employee by clarifying job responsibilities, stipulating each party’s rights, and ensuring job security.
4. Service Contract
Service contracts are legal documents between a client and a service provider. It specifies the roles and responsibilities of both parties in completing and paying for work. They can also include time frames for starting and finishing the job, additional due dates if necessary, and other procedural details.
5. Sales Contract
Sales contracts are legal documents between a buyer and a seller of an asset, usually real estate, that specify the terms of the sale and the parties’ rights and responsibilities in the transaction. It will be signed by the buyer and seller, as well as their witnesses.
6. Asset Purchase Agreement
Asset purchase agreements , also known as APAs, are contracts between a buyer and a seller that spells out the terms and conditions of a company’s asset purchase and sale. These legal documents generally include provisions, such as purchase price, credit terms, liens , asset encumbrances, and closing terms.
7. Terms of Service
Terms of service, often referred to as ToS, refer to rules and regulations that a provider attaches to a software service or website. These types of legal documents are so common in the digital space that users now expect them as a condition of using the software.
8. Privacy Policy
Privacy policies are legal documents that explain how a company or website collects, handles, and processes personally identifiable information (PII). It specifies whether the information is private or sold and what they can do to opt-out.
Examples of Legal Documents
Understanding the meaning of legal documents is the easy part. The trick is knowing that their power lies within situations involving conflict, questions, and relationships. Some clauses and provisions will protect you just in the knick-of-time or in uncommon situations.
Here is a hypothetical example of a business scenario involving legal documents and the power of provisions:
- Worthy Rent-A-Car rents out passenger vehicles in New York City
- Jerome has his car stolen and needs to rent one from them
- His friend, Laney, drives him there to pick up a reserved, mid-size vehicle
- Janet, the car rental agent, informs Jerome that there are no mid-size vehicles left and that he will need to take a compact car
- Jerome feels dismayed and states that the point of a reservation “is to hold it”
- Janet shows Jerome the provision in his rental agreement saying they cannot guarantee specific vehicle types
- Jerome reluctantly accepts the terms and drives away with a blue Ford Escort after insinuating that he is going to damage it out of spite
- Worthy Rent-A-Car has insurance policies and legal documents in place so that moral hazards transfer to Jerome if he intentionally damages the car
This particular example highlights how legal documents protect companies and people alike. While verbal agreements are enforceable in most states, you should always put them in writing!
Who Prepares Legal Documents?
Anyone may need to prepare legal documents for a personal or business transaction, and document drafting measures will depend upon the transaction type. For example, end-of-life planning requires estate planning documents, or selling a house requires real estate documents.
If you want to draft legally sound contracts, always seek legal advice from contract lawyers . They will understand your situation, apply the law to it, and craft the perfect document that meets your needs.
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