What should you do when writing up a business contract?
- Know all the details of the agreement
- Utilize a contract checklist or template
- Put everything in writing
- Make it easy to understand
- Make it safe to sign
All businesses have important agreements they make with other entities. To ensure that these agreements are legally binding, as well as for an added layer of security for both parties, contracts are formed between or among them.
A written contract is a document outlining and defining an agreement between two parties that creates an obligation for one or both of them to perform a duty or duties. Many first-time business owners are familiar with contracts but don’t really know how to go about writing them when the time comes to do so.
Without further ado, here is a guide to writing a business contract.
Know all the details of the agreement
Before you write up your contract, you need to know the details that will go into it. Try to clarify as many things as you can about your agreement. Who are the two parties? What are they agreeing on? What terms are there?
You’ll need to do this because effective contracts are specific when defining terms, especially in cases where money is involved. It’s less messy if you already know the contract details long before you even start writing.
Utilize a contract checklist or template
Nowadays, you don’t need to have a lawyer handle your contract for you, at least not at the very beginning. You can draft it up based on the many templates and checklists available online for the specific kind of agreement you will be partaking in, and only then should you have a lawyer take a look at what you’ve written. You’ll be saving on consultation fees that way, too.
Moreover, once you have a contract template, you can save it for future agreements with other parties on similar terms. This is especially great for things like employment or service rendering contracts, which are necessary for every new hire or client you bring in.
Put everything in writing
As we said earlier, for a contract to be effective, it needs to specify as many aspects as possible. Defining the parties correctly, for example, is something that businesses sometimes struggle with, especially if one or both parties are incorporated businesses. Remember to confirm with the other party their personal details, like correct names and addresses.
Essentially, all contracts have three elements. The first is the agreement, which states who the parties are and what has been agreed upon. The next is consideration, which defines the exchange of something of value between the two parties—for example, payment in exchange for goods or services. Finally, there’s intention, which allows both parties to be legally bound by the documented promise.
Make it easy to understand
Some people assume that all contracts involve “legalese” and words that are too hard for a non-lawyer to understand. Because of that, they’re afraid to sign contracts because they don’t understand what they’re agreeing to. Or worse, they sign contracts without fully understanding the terms. Both cases are equally bad.
To prevent either case, avoid using jargon that is too technical. Keep it simple and straightforward. Don’t beat around the bush when you define what the terms are, and keep sentences succinct.
As you write, remember the purpose of your agreement. Remember that it needs to be mutually beneficial to both parties. Remember to include stipulations that explain what will happen in possible situations, like where the contract may or may not apply, what happens if a party decides to back out, and until when the contract is valid.
Make it safe to sign
One of the most important steps in writing up your contract is making it safe to sign. This includes ensuring that the parties involved are actually the ones signing the contract, that only the terms signed for are agreed upon, and that any changes made post-signing are considered invalid.
That’s where services like Twala come in. Twala makes it safe to sign documents through its digital signature technology, which has a number of security measures in place to keep your contract secure. For a better understanding of these security measures, you can read this previous article in our blog, but here’s a quick rundown as well: Twala uses cryptographic technology to secure documents and bind the identities of the signatories to make it tamper-proof. At the same time, with each document created, it starts an audit trail that takes note of all the transactions related to the document, including the details of the signatories, their IP addresses, and a digital timestamp. This way, you have undeniable proof should the contract be subject for litigation in court.
We’ve suggested some steps for writing a business contract, but we also recognize that, with time, you or your team will have enough experience making contracts to come up with your own set of rules. Until then, we look forward to partnering with you in making your contracts safe, secure, and reliable through our e-signature solution in the Philippines. Click here to contact Twala or book a free demo here today!