Tips for Writing a Legal Business Contract

You’ve spent a lot of time and energy getting your business off the ground, and you feel ready to draw up your first business contract with another party. Before you let your excitement get ahead of you, understand the importance of taking out the time to draw up a solid, legal and fair contract that protects everyone’s business interests. Learn how to create a legal business contract that doesn’t contain legal traps or vague language. 

Get Everything in Writing 

No matter if you enter a contract with a family member or a good friend you used to go to school with, put your agreement in writing rather than make a verbal agreement. Protect yourself with proof of any agreement you make so you can legally enforce it. Also, by writing the agreement, you do not have to worry about you or the other party forgetting the particulars of your contract or misinterpreting your words, as any business litigation professional can attest.

Note Everyone’s Contact Information 

Include the official business name, main business contact, billing address and physical address of all parties involved in the agreement. Once you note everyone’s name or title, use it in the appropriate sections of the contract. Doing so better ensures the agreement has a personal touch, and it also clears up confusion regarding who’s who in the contract. 

Include Easy-to-Understand Language 

Just because you sign a legal contract does not mean you must fill it with legalese and large words. The best business agreements are easy to understand, so anyone who signs them can do so with confidence that they know what they’re agreeing to. That said, do not be afraid to dive into specifics regarding what obligations and responsibilities all parties bear. Also, include a section that discusses what happens if any party fails to meet her or his obligations, deadlines and the like. How would you like to remedy the situation? 

Add Project Details and Scope

Dive into specifics of the agreement. For instance, if you’re editing a novel, will you only check for proper grammar, or are you expected to edit for proper character development and motivation? Do you have to write a synopsis? How many full edits are you expected to do? With this level of specification, you have a better understanding of the project scope and can schedule your time and other work accordingly. Also, other parties can adjust their expectations and set their pay accordingly. 

Note What Happens Upon Terminating the Contract 

Sometimes, things do not work out as you want them to in business agreements. It is better to prepare for a contract termination well before one happens. If you or the other party wants to back out of the agreement, are payments refundable? Do all parties have the option of terminating the agreement after a major agreement violation? 

Include Payment Details 

Speaking of pay expectations, breakdown payment specifics in the agreement. You and the other party may agree to installment payments, or perhaps you’re fine with receiving half the payment at the beginning of the project and the other half after you deliver the final product. Do you want payment terms? For instance, using the novel editing example above, maybe you expect payment within two weeks of submitting the first editing pass. Use concrete dates, and note the preferred method of payment. Usually, the biggest reason for a contract dispute is muddled money matters. By adding specific payment details, you leave very little to misinterpretation.  

Create a Schedule

Sticking to a schedule and honoring deadlines helps keep business operations flowing. Include specific deadlines in your contract, such as project milestones and final deliverables. Ensure all parties know whether deadlines hinge on their actions, such as submitting a final draft by a specific date before moving to the next step of the project. 

Add a Confidentiality Clause 

Depending on the access to company information you and other parties have for the project, you may want to include a confidentiality clause in the agreement. While you hope the other person keeps your trade secrets and business practices confidential, you never know what parties may let slip loose or how revealing that information may impact your company. Let the other person know without a doubt what you expect to remain confidential, even if those details are only in the contract. 

Note State Laws Governing the Agreement 

If you encounter a contract disagreement, list which state laws you want to fall back on to handle the situation. This is especially vital if any other party lives in a different state than you. In that case, note which state’s laws you want to use. By neglecting to include these details, you risk a legal argument that could be more expensive and time-consuming than it needs to be. 

Take your time when drafting a business contract. Consider having a commercial law professional look over your work to make sure you cover all your bases. 


Updated September 13, 2020

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