10 Things to Remember While Creating A Simple & Efficient Contract

    Having a contract in place is the best way to make the conditions of an agreement crystal clear for all parties. The most successful business owners know that an agreement based on just a handshake might be a quick recipe for disaster. A well-written contract is necessary to protect your business from negative consequences. To make sure your business is protected, you should be familiar with the basics of contract law and how to manage contracts. How to create the contract then? This handy guide includes 10 tips you should follow when creating a simple and efficient contract, as well as what the essential elements of a contract are.

    Get Every Single Contract in Writing

    Certain contracts (e.g. agreements for the sale of real estate etc.) must be in writing to be enforceable. However, even if it is not required, every single contract should be always in writing. You don’t want to put yourself in a situation where your business’s future is dependent on what your partner said, do you? The written contract increases the clarity and understanding between the parties and reduces the likelihood of a dispute. On top of that, by creating clean contracts, your business is highlighting its professionalism in the industry.

    Keep Your Contracts Simple

    Transparency is key. Simple language builds trust and improves relationships. Therefore, simple language is usually preferred in contracts. It increases the clarity in the contract and helps parties to avoid misunderstandings. Don’t forget about some good writing practices: use simple sentences, write out contractions, employ bullet points. It all assists in making the contract stronger.

    Clearly Identify the Parties

    Yeah, it seems obvious. However, it turns out that several contracts fail to evidently identify who the contract is pertaining to. You should always include the correct legal names of the parties to the contract. It should be 100% clear who is responsible for the obligations under the agreement. The ‘who’ is just as important as the ‘what’, ‘when’, ‘where’, and ‘why’ in the contract. For example, if your business is organized as an LLC, identify it by its current legal name including the LLC suffix. 

    Make Sure You Are Dealing with The Right Person

    Very often, business owners waste time negotiating business agreements with junior persons who must get approval from the boss. So, you should always find the decision-maker when negotiating. Otherwise, you may end up with a contract that isn’t worth the paper it is written on. Before you make any agreement, check whether the person you negotiate with has the authority to bind the business. Very often, especially in smaller businesses, the owner is the right person.

    Talk About What Happens If You Don’t Agree

    There is always the possibility that the agreements will not go as planned. Disagreements in any relationship are inevitable, after all. Therefore, you should prepare an escape plan. Agree on a way to resolve disputes. Your contract should define what you and the other party will do if something goes wrong. Usually, it is enough to use a clause on alternative dispute resolution. This will probably prevent the parties from fighting in the court if you don’t agree at some point during the collaboration. All contract templates include such clauses. 

    Get A Lawyer 

    Having a lawyer review is always a good idea. The contract will become stronger and more secure, and you will sleep better at night. Especially if your contract is very large in scope or has risks associated with it. A lawyer will understand the latest laws impacting your contract and industry. They will explain to you how to create a contract in the most efficient way. 

    Specify Payment Obligations

    Usually, contracts include money-changing hands. Therefore, you should specify who pays whom and how payments will be made. Do not forget to specify when the payments must be made and how the payments ought to be made. This part of the contract should be especially detailed.

    Be Open and Fair, Yet Very Detailed

    Do not use terms that may be construed as being unfair. Highlight everything that has a significant impact on a party as being important in the contract. Keep it very detailed — the contract should be very detailed about the rights and obligations of each party. Do not leave anything out. Even if you discuss something verbally but it is not in the contract, you will not be able to enforce it in the future.

    Decide Where You Will Resolve the Dispute 

    Sometimes, contracts involve parties from different states (or even countries). You should choose only one of the laws to apply to the contract. It is always a good idea to specify where you will mediate or resolve the dispute if any. How to create a contract? The best option is to include a clause that keeps any legal matters in your state/country.

    Keep Your Contract Confidential 

    Whether your business transaction is a $1 million deal or a $100 commercial lease, you should always have an airtight contract. Especially if your agreement allows the other party to access private information. 

    Do you know how to create a contract now? Getting started with contracts can be daunting so it’s always good to have a helping hand — check these ready-to-use contract templates!


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