FIVE COMPONENTS OF A GREAT CONTRACT

by Joelle Steele

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If you decide to write your own contract, remember that this is not an easy task and requires quite a bit of knowledge and skill. You should look over other similar contracts before you draft your own. Here, to start you out on the right foot, are five important tips for writing a contract. They will help ensure that you create a contract that is clear, accurate, thorough, fair, and legally binding.

KNOW YOUR INDUSTRY

Know the industry or trade for which you are writing a contract. If the contract involves more than one industry, be sure you understand both of them equally well. It is often helpful to write out the entire process that the contract will cover when you're deciding what to include. For example: 1) meet with the client to discuss their needs in detail; 2) collect deposit of $1,200.00 from Client to begin the work; 3) do six rough sketches of work to be done; 4) submit rough sketches to Client for review and approval; 5) make any Client changes to the work; 6) submit changes to Client for approval; 7) do final design; 8) schedule work to be done; 9) deliver work to Client; 10) collect final payment from Client. With this kind of a list, you can then examine each step more closely and determine what should be written for it to ensure it is carried out correctly and what the consequences are if it isn't.

LEARN ABOUT LAWS

You might not know every law about everything in your city, county, state/province, or country, or even in your own industry or trade. But you should at least learn what is considered to be usual and customary for the type of transaction your contract is covering. Not knowing these laws can affect the enforceability of the contract. Use your local library and the Internet to learn about the laws that pertain to your particular type of contract.

PREPARE FOR RISKS

Every business transaction has risks. You must think ahead to what the worst is that could happen and be sure to include that eventuality in the contract. For example, if you are a contractor, you will have the need to protect materials stored on a client's property from vandalism, fire, flood, etc. But, if you're a veterinary hospital, you'll need a clause to protect boarded pets from fire or flood. Almost any "force majeure" or "casus fortuitus" (acts of nature or chance) clause will work with most contracts. But don't just leave it at that. You need to provide remedies for breaches (breaking) of contracts. In many cases, breaches and any ensuing lawsuits to resolve them, can be avoided by including a lot more carefully written instructional language in the contract and by including a clause that states that a party has a certain number of days to make good on whatever it is that they did to cause the breach.

BE FAIR

Every contract should be fair. If you're going to do business with someone, start that business relationship on an even footing. Give everyone who is a party of the contract the same treatment, the same way out of the agreement, the same legal recourse, etc. Do not include "punishing" clauses or slant the contract to the benefit of one party over the other. Everyone must be treated fairly for a contract to stand if it is ever challenged in a court of law. Also, if someone feels forced or desperate enough to sign a contract that is not truly fair to them, they may later have grounds for breaking the contract because they signed "under duress." Put aside your fears and prejudices and write a fair contract.

WRITE CLEARLY

No matter how honorable your intentions or how well you know the law, sloppy writing will prevent anyone from understanding your contract. Organize the information in your contract so that it makes logical sense. Put similar things next to each other. For example, put all the paragraphs for fees and terms listed together one after another. Don't "over-write" by repeating yourself again and again in different parts of the contract. This will only make a contract confusing and harder to negotiate and execute, let alone enforce. Write in ordinary English and read over what you write very critically to make sure you didn't leave anything out or that you didn't write something that can be interpreted in different ways (i.e., as "loopholes" that give a person an easy out). Check your spelling by eye and with the spell checker on your word processor. If you are a lousy writer, give your contract draft to someone who isn't and have them read it and correct it where necessary. Once you're sure you've got it right, give it to the other party and have them look it over and make any changes they think should be included.

SUMMARY

A great contract makes for a smooth business transaction, so take your time, think about what you're trying to do, and get input from the other party before either of you signs. And, if you have the least bit of concern about whether or not it is correct, buy a half-hour of an attorney's time and have it reviewed. It is always money well spent to make sure your contract has you both fully covered.