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.
Meet some of our Contract Drafting Lawyers
Orin K.
I'm an employment lawyer. I counsel and represent employees in all professions, from hourly workers to doctors and executives, and all in between. I also counsel and represent employers in many aspects of employment law.
Abhijit "Beej" D.
Beej serves as counsel to innovators and entrepreneurs in a wide array of legal and business matters worldwide.
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Scott S.
Scott graduated from Cardozo Law School and also has an English degree from Penn. His practice focuses on business law and contracts, with an emphasis on commercial transactions and negotiations, document drafting and review, employment, business formation, e-commerce, technology, healthcare, privacy, data security and compliance. While he's worked with large, established companies, he particularly enjoys collaborating with startups. Prior to starting his own practice in 2011, Scott worked in-house for over 5 years with businesses large and small. He also handles real estate leases, website and app Terms of Service and privacy policies, and pre- and post-nup agreements.
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Reuben O.
As an entrepreneur at heart, I enjoy working with business owners and executives on a variety of corporate matters, including mergers and acquisitions, corporate financing, corporate governance, public and private securities offerings, privacy regulation and early-stage corporate matters including formation. As a lawyer and business professional, I understand the value of providing personal service and focused legal answers to clients navigating a rapidly changing regulatory environment. Whether in Aerospace, Consumer Goods, or Technology, I find great success in work collaboratively with clients to strategical structure their business or implementing strategic growth-oriented financing opportunities.
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Thaddeus W.
Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Lover of Dogs, Cribbage, Craft Beer, Bourbon, and Cigars
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Nichole C.
Licensed attorney in KY and Federally JD, 2006 University of Louisville MBA, 2006 University of Louisville BS, 2001 Berea College Licensed Title Agent Arbitrator and Certified Mediator Business Consultant Adjunct Professor, Law and Business
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Michelle F.
I provide comprehensive legal and business consulting services to entrepreneurs, startups and small businesses. My practice focuses on start-up foundations, business growth through contractual relationships and ventures, and business purchase and sales. Attorney with a demonstrated history of working in the corporate law industry and commercial litigation. Member of the Bar for the State of New York and United States Federal Courts for the Southern and Eastern Districts of New York, Southern and eastern District Bankruptcy Courts and the Second Circuit Court of Appeals. Skilled in business law, federal court commercial litigation, corporate governance and debt restructuring.
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Steve C.
I am a corporate and business attorney in Orange County, CA. I advise start-ups, early-growth companies, investors, and entrepreneurs in various sectors and industries including technology, entertainment, digital media, healthcare, and biomedical.
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Oscar B.
Oscar is a St. Petersburg native. He is a graduate of the University of Florida and Stetson University, College of Law. A former US Army Judge Advocate, Oscar has more than 20 years of experience in Estate Planning, Real Estate, Small Business, Probate, and Asset Protection law. A native of St. Petersburg, Florida, and a second-generation Gator, he received a B.A. from the University of Florida and a J.D. from Stetson University’s College of Law. Oscar began working in real estate sales in 1994 prior to attending law school. He continued in real estate, small business law, and Asset Protection as an associate attorney with the firm on Bush, Ross, Gardner, Warren, & Rudy in 2002 before leaving to open his own practice. Oscar also held the position of Sales & Marketing Director for Ballast Point Homes separately from his law practice. He is also a licensed real estate broker and owner of a boutique real estate brokerage. As a captain in the US Army JAG Corps, he served as a Judge Advocate in the 3rd Infantry Division and then as Chief of Client Services, Schweinfurt, Germany, and Chief of Criminal Justice for the 200th MP Command, Ft. Meade, Maryland. He is a certified VA attorney representative and an active member of VARep, an organization of real estate and legal professionals dedicated to representing and educating veterans. Oscar focuses his practice on real small business and asset protection law.
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Rachael D.
We help simplify every transaction and provide a superior level of customer service to create long lasting and trusted relationships with our clients. Our goal is to guide our clients with practical and zealous legal representation and eliminate the difficult nature of any legal transaction.
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