How To Draft A Contract And Minimize Future Disputes

by Scotty
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From the simplest work orders to the most complex buy/sell agreements, contracts are how companies and people do business with one another in a civil law society. Because many people in the business world negotiate, draft, and execute contracts on an almost daily basis, they sometimes take shortcuts that result in contracts that do not properly reflect the contracting parties’ true intentions. Fortunately, such mistakes are often of no consequence. But, in those few situations in which they matter, contact errors can lead to disastrous consequences.

Listed below are a few suggestions to consider when drafting contracts so that the parties’ intent is clearly set forth, and drafting errors are minimized:

• Outline all key terms – preparing a short outline of key contract terms (e.g. a letter of intent or deal memo) that the other side reviews and approves is a good first step in the drafting process because it helps to ensure that both parties are in agreement as to the most important terms. The final contract can then be prepared using the approved outline.

• Keep contract language simple and clear – All language in a contract should be as plain as possible. If an average high school student would not understand the contract language, consider revising it.

• Clearly define key terms – When using defined terms, make sure the definitions are as clear and simple as the rest of the contract. And, use all defined terms consistently (e.g., if a word has a capital first letter, make sure it is defined, and used according to its definition).

• If using industry or technical terms, make sure they are understood consistently by both parties, and are consistent with the standard in the industry – A source of considerable litigation is the use of undefined technical or industry terms in contracts. Just because one party believes a particular term is clear in their industry, the other party may have a different understanding. Where there is any doubt as to the meaning of technical terms, add extra description and explanation so that there can be no doubt as to the parties’ mutual understanding of such terms.

• Avoid last minute or rushed drafting and reviewing – Leave time for multiple reviews of each contract by the decision makers on both sides, including consideration of the agreement’s key terms and the agreement as a whole. Where practical, a relaxed and thorough review process helps ensure that each party’s entire intent is expressed in the contract, and any disagreements are spotted and addressed before the contract is signed.

While no amount of preparation, drafting, and reviewing can guarantee a dispute-free contract relationship, following the suggestions listed above will cut down on many disputes I see on a daily basis. Additionally, a will can be drafted to safeguard both parties in case anyone passes away. For that, look for a will lawyer near me. In certain cases of contracts, it is beneficial to have power of attorney service too. Given how costly such disputes can be, my clients find that it is almost always worth spending the extra time to ensure that their contracts mean what they say.

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