Contract Drafting: Essential Steps You Should Know

Contract drafting is a cornerstone of effective business relationships and legal agreements. Whether you’re drafting a simple service contract or a complex multi-million dollar deal, the quality and clarity of your contract can significantly impact the success of the agreement and prevent future disputes. But where do you begin? What are the essential steps to ensure your contract is comprehensive, clear, and enforceable?

In this blog, we’ll explore the critical steps in contract drafting, drawing insights from various experts in the field.

Essential Tips for Successful Contract Drafting

1. Andy Gillin, Attorney & Managing Partner at GJEL Accident Attorneys

Before drafting a contract, it’s essential to understand the client’s needs and objectives. This involves identifying key terms, conditions, and potential risks and gathering relevant information, such as the parties’ backgrounds and any prior agreements.

A valid contract must include critical elements like an offer, acceptance, and consideration. Clearly defining each party’s obligations, along with indemnity clauses, dispute resolution methods, and termination conditions, is vital. Specificity and clarity in these elements prevent misunderstandings.

Contracts should use clear, straightforward language and avoid legal jargon to ensure all parties understand the terms. Common pitfalls include ambiguity, lack of detail, and failure to address potential future scenarios. For instance, employment agreements must clearly outline roles, responsibilities, compensation, and termination conditions.

Common mistakes in contract drafting include omitting necessary elements, neglecting stakeholder consultation, and overlooking details like governing law or jurisdiction clauses. Relying on boilerplate clauses without customization can also lead to problems, as each contract’s context varies.

The review process is crucial for ensuring a contract is comprehensive and error-free. This includes multiple readings and, ideally, having another legal professional review the document. Consistency in clear definitions and alignment with the client’s objectives are key aspects of this process.

Staying updated on legal standards is essential to ensure compliance with relevant laws and regulations. Including necessary compliance statements, such as data protection clauses that meet GDPR requirements, is critical to avoiding legal issues or invalidating the contract.

Effective contract drafting requires a thorough understanding of the client’s needs, explicit language, and a comprehensive review process. Addressing all elements and ensuring legal compliance is key to creating enforceable contracts.

2. Harrison Tang, CEO at Spokeo

1. Understand Your Client’s Needs:

• Clearly define the purpose, objectives, and potential risks.
• Identify key terms, such as payment, scope, and termination.

2. Include Essential Elements:

• Offer, acceptance, consideration.
• Clear definitions of obligations and responsibilities.

3. Use Clear and Concise Language:

• Avoid ambiguity and legal jargon.
• Define key terms and ensure mutual understanding.
• For employment contracts: Specify job duties, compensation, and benefits.

4. Avoid Common Pitfalls:

• Clearly define terms, provide adequate consideration, and include sufficient termination clauses.

5. Thoroughly Review and Edit:

• Carefully examine the contract for errors and inconsistencies.
• Involve multiple reviewers for added accuracy.

6. Ensure Legal Compliance:

• Research and comply with relevant laws, regulations, and industry standards.

7. Additional Tips:

• Use templates as a starting point, but tailor contracts to specific needs.
• Consider seeking legal counsel for complex agreements.

3. George Yang, Founder and Chief Product Designer of YR Fitness

Initial Considerations: Understanding Client Needs and Identifying Key Terms

Before drafting a contract, clearly define the client’s needs and objectives. Discuss goals, potential risks, and essential terms to ensure the contract meets their requirements. For example, when negotiating contracts with suppliers at YR Fitness, clarify the scope of work, payment terms, and delivery schedules.

Identifying key terms early helps prevent misunderstandings and ensures the contract reflects the agreed-upon terms. Consider potential contingencies and include provisions to address them. Conduct a preliminary legal risk assessment to identify and mitigate potential legal issues. Adhere to a timeline for drafting and review to avoid delays that could impact the client’s objectives.

Key Elements: Essential Factors of a Contract

A binding contract must include an offer, acceptance, and consideration. At YR Fitness, ensure these elements are clearly defined, along with parties’ obligations, performance timelines, and remedies for breaches. Include a dispute resolution clause to outline how disagreements will be managed and confidentiality clauses to protect sensitive information.

Termination clauses should specify conditions under which the contract may be ended to safeguard both parties’ interests. Ensure the contract is appropriately signed and dated to validate its terms.

Drafting Tips: Best Practices for Clear and Enforceable Contracts

Use clear and precise language, avoiding jargon that could confuse the parties involved. At YR Fitness, we emphasize drafting legally sound and easily understandable contracts. Break down complex terms and provide examples as needed. Avoid ambiguous language that could lead to disputes.

Ensure consistency in all contract terms to prevent confusion and enforceability issues. Involve all stakeholders in the drafting process to address their concerns and update contract templates regularly to reflect changing laws and practices. Finally, thoroughly review with a legal professional to identify and correct any issues before finalizing the contract.

4. Corey Pollard, Injury Lawyer & Founder of Corey R. Pollard

When drafting a contract, my first step is understanding my client’s needs thoroughly. For instance, in a workers’ comp settlement agreement, I ask whether they prefer a lump-sum payment or ongoing support. This ensures the contract meets their expectations.

I prioritize clarity and simplicity in the contract, avoiding legal jargon to prevent confusion. For example, in a fee agreement, I ensure the payment terms are explicitly clear to avoid misunderstandings.

Before finalizing, I meticulously review the contract to catch any errors and ensure compliance with Virginia’s laws. This thorough check helps prevent mistakes and legal issues for my clients.

5. Michael Avanesian, Personal Injury Attorney and founder of Avian Law Group

Preliminary Steps Before Drafting a Contract

Before drafting a contract, it’s crucial to understand the client’s goals and requirements. This involves identifying key clauses that will form the contract’s foundation. Thorough discussions with the client are essential to tailor the contract to their specific needs. Conducting a risk assessment to anticipate potential conflicts and implementing clauses to address them can prevent future disputes.

Critical Elements in Every Contract

A contract must include essential components to be enforceable: offer, acceptance, and consideration. Clearly state the terms, obligations, and any specific requirements. Including and articulating these elements clearly will result in a strong and enforceable contract.

Best Practices for Drafting Clear, Enforceable Contracts

Use plain language and avoid ambiguity to ensure clarity and prevent miscommunication. Include detailed dispute resolution clauses, such as arbitration or mediation, to resolve conflicts effectively. Regular consultation with legal professionals during drafting ensures compliance with applicable laws and prevents common errors.

Steps for Drafting Specific Contract Types

For contracts like employment agreements, clearly define job duties, compensation, benefits, and employment duration. Ensure non-compete agreements are reasonable in scope and duration. Confidentiality agreements are vital for protecting sensitive information. Well-defined termination terms help avoid legal issues.

Common Pitfalls to Avoid

Avoid using vague language, as it can lead to disputes and misunderstandings. Ensure contracts comply with state laws to be enforceable. Long-term agreements should be flexible to accommodate future changes. Protect critical data and clearly outline termination procedures to prevent complications.

Ensuring a Comprehensive and Error-Free Contract

Thoroughly review and analyze contract terms to ensure accuracy and completeness before signing. Consult legal counsel to identify potential risks and negotiate necessary revisions. Regular audits and performance indicators can help identify non-compliance and facilitate corrective actions. Contract management software can streamline the process and ensure secure document storage.

Compliance with Relevant Laws and Regulations

A contract must comply with all applicable laws and regulations to be enforceable. Stay updated on changes in local, state, or federal laws that may affect the contract. Consulting legal experts in the relevant field ensures the contract meets all legal requirements. Incorporating industry-specific regulations and corporate policies further enhances compliance.

6. Ben Michael

It helps immensely to have starting templates for common types of contracts you deal with. While you, of course, want to customize each one for the specific needs of the contract, you can save so much time by not having to start from scratch every single time. Also, templates allow you to ensure that you include all of the necessary compliance-related details instead of accidentally leaving things out because you had to type up an entire contract from scratch quickly.

With any contract, it is essentially that all agreements are physically on the document and not just verbal because verbal agreements cannot hold up legally. Additionally, all parties need to sign, and all parties should receive a copy of the contract for their records.

7. Andrew Pickett, Trial Attorney and Founder at Andrew Pickett Law, PLLC

1. Initial Considerations: Before drafting a contract, deeply understand the client’s needs. Clear dialogue to identify key terms and objectives sets a strong foundation.
2. Key Elements: An enforceable contract must include fundamental components: offer, acceptance, and consideration. These ensure the agreement’s validity.
3. Drafting Tips: Use clear, straightforward language to avoid ambiguity. Avoid complex legal jargon to ensure all parties easily understand the contract.
4. Contract Type Specifics: For specific agreements like employment contracts, clearly outline rights and obligations to reduce conflicts and enhance compliance.
5. Common Pitfalls: Anticipate potential issues and include clauses to address them. Avoid overlooking contingencies that could lead to disputes.
6. Review Process: Thoroughly review the contract, including reading it aloud and getting a second opinion, to catch errors and ensure all provisions are accurate.
7. Legal Compliance: Stay updated on relevant laws and regulations to ensure compliance with current legal standards.

When drafting contracts, consider future changes and ensure the language is straightforward and adaptable. Regularly update agreements as circumstances evolve and maintain open communication with all parties to foster transparency and trust.

8. Julia Rueschemeyer, Family Lawyer and Divorce Mediator at Amherst Divorce

Common Mistakes People Make When Drafting Contracts:

Using extremely complicated or legalistic wording is a common error when drafting contracts. Even though it would appear important, this could make the contract confusing for all parties, increasing the likelihood of disputes. When feasible, contracts should be written in plain English and be concise and straightforward.

Common Pitfalls to Avoid When Drafting an Employment Contract:

One typical mistake that can cause disagreements and misunderstandings is using wording that needs clarification. Terminologies such as “performance expectations” and “job responsibilities” should be defined precisely to avoid ambiguity and future problems.

Disregarding local labor rules is, in my opinion, another big mistake. An employer may be liable if they fail to include legally mandated terms, such as overtime compensation, workplace safety, or anti-discrimination rules. To safeguard the interests of both parties, it is essential to make sure the contract is both understandable and complies with the law.

9. Mark Sadaka, Principal & Founder of Sadaka Law

When drafting a contract, begin by understanding your client’s needs and objectives. Identify key terms and goals to guide the contract’s structure. In fields like medically complex litigation, clarity on responsibilities, timelines, and expectations is crucial.

Ensure the contract includes fundamental elements such as offer, acceptance, and consideration. Add scope, confidentiality, and dispute resolution details tailored to the contract type, whether employment, sales, or specialized services.

Use precise language to avoid vagueness and anticipate potential issues to prevent misunderstandings. For example, in vaccine injury cases, the terms of representation and client duties must be clearly defined.

Finally, thoroughly review the contract to catch errors and ensure compliance with relevant federal and state laws.

10. Bert Krages, Attorney at Krages

When drafting contracts, it’s essential to tailor dispute resolution provisions to the deal’s specifics. Too many contracts rotely specify that the venue will be in the courts of the state where the drafter resides and that the prevailing party in such a dispute will be awarded its attorney fees. However, it’s more effective to consider the likely dispute amount and the most suitable tribunal for resolution.

For instance, disputes involving small amounts, like between a plumbing company and a homeowner, are often straightforward and best handled in small claims court to save time and money. In contrast, complex and high-stakes disputes, such as those between Fortune 500 companies, may require access to extensive discovery, lengthy trials, and appeals. Tailoring the dispute resolution provisions to these factors ensures a more efficient and cost-effective resolution process.

11. Kalim Khan, Senior Partner at Affinity Lawyers

Before drafting a contract, thoroughly understand the client’s objectives and identify key terms such as payment, deliverables, and timelines. Every contract must include essential elements: offer, acceptance, consideration, and mutual intent. Use plain language and precise terms to avoid ambiguity.

• For employment agreements, specify job responsibilities, compensation, and termination conditions.
• For lease agreements, define the lease term, rent obligations, and maintenance responsibilities.

Common mistakes include not anticipating potential disputes and not updating contracts to reflect legal changes. The review process should ensure legal compliance and logical consistency, ideally with input from multiple reviewers. Ensure the contract aligns with relevant laws and addresses potential disputes to ensure it is robust and enforceable.

The Role of Contract Drafting Services

Effective contract drafting is crucial for successful business and legal agreements, and contract drafting services play a key role in this process. These services provide expert assistance to ensure contracts are clear, comprehensive, and legally sound. By leveraging specialized knowledge, they help businesses and individuals create contracts tailored to their needs while minimizing risks and preventing disputes.

Ready to Elevate Your Contract Drafting?

Ensure your agreements are clear, comprehensive, and legally sound with professional contract drafting services. Our team of experts at Eternity Paralegal Services (EPS) is here to help you navigate the complexities of contract creation, tailor contracts to your specific needs, and minimize risks. Don’t leave your contracts to chance—partner with us for peace of mind and a solid foundation for your business relationships.

Contact us today to get started and see how our contract drafting services can make a difference in your agreements!