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Drafting Contracts

Small business owners and senior-level managers will need to draft various contracts throughout their tenure, although some contracts require the expertise of a qualified business lawyer. The "Drafting Contracts" section provides a general understanding of how to write legally defensible contracts, with articles on commonly misused contractual terms and a primer on how to write a business contract, plus an overview of common business contracts, sample sales contracts, and related resources.

Write a Business Contract: Key Considerations

All valid contracts have to follow some basic rules. At its most basic a contract is formed when one party makes an offer of an exchange of value to another party, who accepts the offer. There are many guides to contract writing, but there are some key elements that all contracts require, including:

  • Intent to make a contract;
  • A lawful subject matter;
  • An offer made by one party;
  • Acceptance of the offer by the other party;
  • An exchange of something of value;
  • A written agreement, in some circumstances.

Revocation, rejection, and counteroffer impact whether an agreement has been created. An offer that has been made but not accepted can be revoked at any time before acceptance, but once the offer is accepted an agreement is made. If you agreed to keep the offer open for a certain amount of time you can't revoke the offer until the period is ended. Rejection happens when an offer is extended but the other party declines to accept the deal. Counteroffer refers to when a party rejects a proposed agreement and offers their own agreement with modified terms.

Accepting a contract is simple by comparison. A party can accept a contract through a clear statement or writing, by performing their part of the agreement, by promising to perform their part of the agreement, or even if the party begins to perform their part of the bargain incorrectly due to their misunderstanding.

How to Write a Business Contract

A business contract provides some clarity for parties attempting to record an agreement. When you are one of the agreeing party it is wise to ensure that your understanding of the agreement is clearly laid out and that you understand all of the terms. Writing your agreement and its terms are an important start, but there are some other basic considerations worth keeping in mind. The contract should be written in language that you clearly understand. Fancy legal terms aren't helpful and when they make the document more confusing they may even hurt.

The written contract should be detailed and establish what each party will do and when their actions should take place. The terms should be as clear as possible. Details about when and how one party will pay the other are particularly important. The contract should also provide for confidentiality where that is important and the contract should also clearly indicate when and how it will terminate.

A carefully crafted contract will take state laws into consideration, may indicate rights to particular remedies and attorney fees when there is a lawsuit as a result of the contract, and may include mediation and arbitration clauses to reduce the expense and difficulty of litigation if a disagreement arises.

Learn About Drafting Contracts