HOW TO DRAFT A LEGAL CONTRACT

Contract drafting is the act of writing down the terms and conditions of an agreement.

CHAMAN LAW FIRM

6/2/2022 6 min read

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HOW TO DRAFT A LEGAL CONTRACT

In order to understand fully the concept of contract drafting, it will be helpful to know what a contract is first. A contract is generally defined as a legally binding agreement made between parties that acknowledges the rights and duties that govern the arrangement. Contracts can be formed through a writing or created by oral agreement. For the purposes of contract drafting, this only refers to written agreements.

Contract drafting is the act of writing down the terms and conditions of an agreement. The parties to a contract may go through several drafts and negotiation sessions before the official contract is finalized. The goal of contract drafting is to create a legally binding document in writing that is clear, concise, and as close to the parties’ intentions as possible.

The drafting process can be very beneficial for contractual agreements. One benefit of the process is that it allows the parties to discuss the terms of the contract before it becomes binding. This can help to prevent the presence of legal disputes over the contract in the future. Even if a legal dispute does occur, it can also serve as evidence of the parties’ original intentions and their obligations.

Also, contract drafting can be used to ensure that the parties understand their respective duties and as guidance if any issues emerge while they are in the midst of satisfying the contract. This is especially true in situations where the contract involves complex conditions.

For instance, employment contracts contain certain provisions and specific terms that differ from the language found in confidentiality agreements.

Generally speaking, however, most contracts follow a basic format and include standard components, such as important words that need to be defined, legalese that indicates the beginning and/or signals the end of a contract (e.g., a signature block), the rights and duties of the parties, how the parties can terminate the contract, general provisions, and some incorporate special clauses (e.g., insurance policies).

In addition, regardless of the type of contract, all contracts must contain the following elements:

An offer;

The acceptance of that offer;

Consideration (usually money);

The contract must identify its parties and those parties must possess the legal capacity to enter into the agreement;

The subject matter of the contract must be one that is legal (e.g., cannot create a contract to hire a hitman);

There must be mutual agreement between the parties;

and The parties must have a mutual understanding of their rights and duties under the contract.

Many contracts also contain specific terms and conditions. Some common contract drafting terms and conditions include:

Force majeure;

• Warranties

• Assignment.

• Severability

• Arbitration clause.

• Confidentiality.

• Liquidated damages clause.

• Time is of the essence clause.

• Indemnification.

• Choice of law and forum selection;

The above terms and conditions all pertain to either events that trigger conditional consequences, duties that the parties are legally obligated to perform, and/or duties that the parties must refrain from or else they risk breaching the contract.

Although contracts may be drafted by any individual, it is often recommended that a lawyer draft and review the final terms to ensure that the contract is legally valid and binding. The parties to a contract will usually be the ones to decide how a contract will be drafted, but it can also depend on the type of contract being created.

There are several advantages of hiring a lawyer to draft a contract. Some benefits of hiring a contract review attorney may include:

  • Preventing future breach of contract issues and other legal disputes; Avoiding the chances of forming an illegal, unconscionable, or voidable contract;

  • Acquiring a clear understanding of the duties and obligations of all parties;

  • Ensuring that all terms and conditions in the contract are what the parties intended;

  • Incorporating additional terms and conditions in the contract that a party may have left out and could be beneficial to them; and

  • Identifying protections or rights that a party has, which can be used either as a defense in a lawsuit or to take legal actions against another breaching party

  • Drafting and reviewing contracts can be a fairly complicated process, especially when a contract involves complex matters. Therefore, if you need help with drafting and reviewing a contract, you should hire a local contract lawyer for further assistance.

  • An experienced contract lawyer can make sure that your contract complies with all relevant laws and that it will be considered legally valid in the event of a legal dispute. Your lawyer can also ensure that it contains the terms and conditions you desire, and can negotiate for supplementary terms that may be beneficial to you or request that unfavorable conditions be removed.

  • In addition, your lawyer can help you draft a clear and unambiguous contract, can explain any terms or conditions that you do not understand, and can answer any questions that may arise during the contract drafting and review process.

  • Finally, if a contract dispute arises or if you wish to take action against a party who breaches the contract, your lawyer can provide representation in court on the matter or can help you resolve the issue outside of a courtroom.

Drafting an effective contract requires a multi-step process. Main steps include:

Determine if all parties can participate: All parties to an agreement must be considered capable for a contract to be valid. One cannot force another person to sign a contract using coercion or duress. In most situations, parties must be over the age of 18 to be able to participate in a contract. Contracting parties must always be mentally fit, including not being under the influence of alcohol or drugs when signing the contract.

Determine consideration: You must state the elements of consideration clearly for a contract to be effective. Remember, consideration is the exchange of something, for example, intellectual property, services, goods, or the promise of an exchange for compensation. A contract cannot exist without consideration.

Set the terms of the contract: A contract's terms must ensure that both parties can receive their desired result from the agreement. The parties should arrive at the terms in good faith, without attempting to use deception. It's best to express terms of a contract in written form instead of orally. Having a written record of a contract makes enforcing that contract much easier.

Decide if you want to use a confidentially clause: Confidentially agreements are useful if your contract involves trade secrets or any other confidential information. By including a confidentially clause, you can make sure sensitive information stays secure. Someone breaking the confidentially agreement will be considered in breach of contract.

Include a dispute resolution clause: A dispute resolution clause details how the parties will deal with a breach of contract. This can include the party responsible for paying attorney fees and whether the parties will use arbitration or litigation. If the parties decide to use litigation, this clause should also include the legal jurisdiction in which the breach should be resolved.

Include a termination of contract clause: Specify the length of a contract when drafting an agreement. Your contract should also state any actions either party can bring to cause early termination of a contract. In contracts involving ongoing services, you might also want to include a provision that allows for giving prior notice to terminate without cause. Thirty days prior notice is common.

Ensure the contract follows all applicable laws: You need to be certain that you establish your contract within the bounds of all laws. If you don't, your contract will end up being unenforceable. You can include the jurisdiction your contract should be interpreted in to make this clear.

Ensure the contract follows industry and other specific requirements: Many contracts also require additional clauses pertaining to the specific business or personal situations the contract covers.

Offer the contract for acceptance: After you draft a contract, you must offer it to the other party so they can consider it. The other party can accept the contract as it stands, proceeding to the final step of signing it. If they do not accept the contract, they can make a counteroffer instead.

Negotiate the contract’s terms: If the other party makes a counteroffer to your initial contract draft, you can either accept that counteroffer or provide your own counteroffer in response. These exchanges of offers may occur back and forth repeatedly until both parties agree on everything. Remember to review the contract after each counteroffer so you are sure you understand all changes that have been made.

Sign the contract: Once both parties agree on the final offer, those parties must sign and date the document. The contract becomes legally binding only at that point. Both parties should obtain a copy of the contract to keep for their records.

The final page of the contract must be reserved for signatures and dates whenever you draft a contract. A contract is not considered to be in effect unless both parties sign and date it. Further, both parties must understand all details contained in the contract before signing it. If a party does not understand any part of a contract, a lawyer must be consulted before signing.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

TEL: 08065553671, 08024230080