Contract Drafting and Review
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The Importance of Contract Review
We enter into contracts every day for business and personal reasons. Some of these contracts are written, while others are oral. In every case, it is important that the terms of the contract are fairly negotiated, properly drafted, and reviewed to ensure the contract meets the intentions of the parties.
Negotiating a contract is very important. By negotiating contract terms, the parties to the contract bargain for their own best interests. While negotiating contracts, it is important to remember the following:
- Parties should be comfortable with their duties and obligations
- The intentions, requirements and expectations each party has of the other party need to be clear at the beginning of negotiations
- Negotiating for a remedy within the contract in the event there is a breach by either party may save time and expense down the road.
"Form contracts" and contracts with the language and terms already set. A common example of when form contracts are those used is in landlord-tenant agreements. When using form contracts, parties usually do not negotiate. This makes it essential to carefully review the terms of the contract in order to be aware of the rights and responsibilities imposed by the agreement.
Many parties may want to tailor a form contract to their needs, and will use the form contract as a model. When drafting the contract, it is important that each party knows exactly what is expected of them. If there are any words that could be misconstrued, or any terms that are ambiguous, parties should be sure to define them within the contract. Ultimately, when drafting a contract, clarifying the terms and duties should be the goal.
Many parties use legal words and language, known as "legalese," when drafting contracts. However, this may, make the obligations and terms of the contract confusing. Using regular language will insure that both parties understand what the contract says and means, and therefore understand what they are agreeing to.
It may sound obvious, but before signing a contract, each party should read it. In reviewing the contract, parties need to make certain they understand the stated obligations are under the contract. If there is any uncertainty as to the duties of each party, and yet they signed the contract, they may be liable for breaching the contract. Having a legal professional review the contract terms will ensure that the needs of each party will be met and that no party will obligate themselves unexpectedly.
Types of Business Contracts
There are many different types of contracts encountered in business dealings. Some typical business contracts:
- Agreement for the Sale of Goods (specifies the agreement between two parties when purchasing or selling goods).
- Purchase Order (a document that a buyer provides to a seller outlining the terms of the sale).
- Employment Agreement (non disclosure of trade secrets, stock options, dispute resolution procedures, transfers, retirement, etc.).
- Confidentiality Agreement (a contract in which the signing party agrees not to disclose any information about the other party in the contract).
- Lease for Real Property ( contract between a landlord and a business to use the property for the purpose of running the business from that property).
- Franchise Agreement (the contract that establishes the relationship, including rights and obligations, of the franchisor and franchisee).
Should I Consult a Contract Lawyer When Drafting and Reviewing Contracts?
Contract negotiations, especially in the context of important financial contracts, can be complicated and difficult. A business attorney can assist you with negotiations so your needs and requirements will be met. Additionally, a lawyer can help you with the initial and final draft and contract review, and explain to you your duties under the contract. Hiring an attorney will help you secure your best interests throughout the entire contract process.
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Last Modified: 03-27-2015 08:35 AM PDT
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