How to write your own business contracts: 10 key elements

Everyone knows that the best practice in business is to put agreements in writing. But many small business owners don’t. In my experience, a combination of factors contributes to this error. Business people often don’t want to add a layer of expense to the business deal by involving “the lawyers.” In addition, business agreements are often urgent, and as a result, people often believe that they do not have time to consult an attorney. Here are ten elements of any good contract. Follow these steps and you can do it yourself.

1. Put it in writing

Verbal agreements are often legal and binding; however, they are generally more expensive and more difficult to enforce in court (in some situations, they cannot be enforced at all). Most agreements must be in writing. And this is where the problem begins. I have had clients who have used business agreement contracts in a second different situation with disastrous results. A written agreement is less risky than a verbal agreement, but only if you have a document that clearly spells out the rights and obligations of each party in the event of a disagreement. Using partnership agreements or vendor contracts online can be just as bad as reusing old agreements without carefully reviewing them. In one case, I represented a partner in a partnership dispute. The parties had purchased a partnership agreement online and the agreement specifically allowed individual partners to compete with the partnership. While that clause is contrary to common sense, neither party read the agreement and got it. Therefore, it was enforceable to the great surprise of one of the partners.

2. Keep your deal clear.

Contrary to what many lawyers think, it does not take a lot of legal buzz to make a contract enforceable. Instead, what is required is short, clear sentences with a simple and logical heading system that provides a roadmap to the reader as to what is in the paragraph. And yes, you can write your own contract if you put a little effort into it.. Just like you could change the oil in a modern car or work on your bathroom tiles. You must weigh the cost over time for the benefit of hiring an attorney. An experienced attorney should be able to quote you a flat fee, up front with no obligation, so it doesn’t hurt to ask.

3. Deal with the person you can hire on behalf of the company.

Don’t waste time negotiating a business deal with a minor who has to approve everything with someone above him (or her) in the business. If you’re not sure who has the authority to link a business, ask.

4. Describe the parts accurately.

Include the correct legal names of the parties to the contract. Clarify who is responsible for doing what.

5. Include the details in the written agreement.

The agreement must establish the rights and obligations of each party. Most attorneys include language in a contract that states that the written agreement is the entire agreement between the parties.

6. Specify the payment obligations.

Obviously, most contracts arise from agreements in which one party provides goods or services and the other countries provide them. Specify when payments must be made and the conditions for making them. If you are paying in installments or only when work is completed to your satisfaction, say so and list dates, times, and requirements. Consider including the payment method as well: check, cashier’s check, or credit card.

7. Agree on the circumstances that terminate the contract.

It makes sense to establish the circumstances under which the parties can terminate the contract. For example, if one party misses too many important deadlines, the other party should have the right to terminate the contract without being legally hooked for breaching (violating) the agreement.

8. Specify how disputes will be resolved and whether the winning party will receive attorneys’ fees and costs.

Write in your agreement what you and the other party will do if something goes wrong. I’m not a fan of refereeing. Particularly in California it is a very expensive proposition with retired judges acting as arbitrators demanding hefty fees. Many judges openly admit that they dropped out of court to earn more money as arbitrators. You also want to carefully consider whether the winning party in a legal dispute will receive attorneys’ fees and lawsuit costs, such as filing fees, deposition fees, and the like. This can be a good idea if you have to fight for a modest amount like $ 100,000.00 (I know, I know … Right now you’re thinking I have an unusual idea of ​​modesty!) The reality is that without an attorney’s fee clause, you could have a victory in name only as arbitrations and trials are expensive. On the other hand, if you are more likely to breach the contract than the other, you may not want an attorney’s fee / cost clause.

9. Choose a state law that governs the contract.

If you and the other party are in different states, you should choose only one of your state’s laws to apply to the contract to avoid complicated legal disputes later on, and I can’t think of any reason why you would agree to litigate under the laws. from a state other than California as I write this. In addition, you want to specify where you will mediate, arbitrate, or take legal action under the contract. This is an important thing to keep in mind when another party presents you with a contract. For example, if you want to become a franchisee and end up having a legal dispute, you may have to pursue it thousands of miles away based on state laws that differ greatly from California laws.

10. Keep it confidential.

Often times when one company hires another to perform a service, the other company will have access to confidential business information. Your agreement should contain mutual promises that each party will maintain the confidentiality of any business information that it becomes aware of while performing the contract. This clause is very different from a non-compete clause. California’s laws on non-compete clauses are unique and the subject of another post.

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