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Review This Before Drafting a Contract

thinkstockphotos-500097357When you draft a contract, your goal is to state the terms and conditions of the parties’ agreement clearly and completely, using as few words as will accomplish the job. Follow these five principles and you’ll be well on your way to meeting this goal.

  1. Make the contract understandable to the parties. The parties have to understand the document if they’re going to use it. This means that you should prepare a complete, readable working document rather than an eloquent example of impressive but difficult-to-understand legal prose.
  2. Make the contract understandable to a jury. Laypersons should be able to understand the wording of the agreement because a jury of laypersons may have the ultimate say on what the agreement means.
  3. Make sure you understand the deal. You have to understand the details of a transaction to properly draft the documentation for it. The time spent in learning the details of the transaction and structuring the agreement will make the document more accurate, effective, and complete.
  4. Make sure the contract accomplishes your key goals. The document should
    • Transform the parties’ imperfectly formed ideas into a fully formed, legally binding agreement, i.e., the agreement should contain all legally essential and material elements;
    • Establish policies and procedures for the continuing relationship between the parties; and
    • Establish and protect the parties’ rights.
  5. Make the contract less risky. An important part of your job is to anticipate risks and problems that may arise, so that the parties can allocate those risks by agreement and thereby reduce the possibility of litigation.

Clarity is key. You document shouldn’t create traps for the unwary—that approach can damage the relationship between the parties, raise ethical issues, and generate unnecessary litigation.

The merit of a contract document isn’t measured by the number of pages, but by how effectively and efficiently it states the parties’ intentions. Learn more drafting strategies and get sample contract provisions in CEB’s Drafting Business Contracts: Principles, Techniques and Forms, chap 2.

Other CEBblog™ posts on contract drafting:

© The Regents of the University of California, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

12 replies on “Review This Before Drafting a Contract”

What a great, concise checklist. One thing I’ve learned is that it’s important to wargame how defaults and terminations will be handled. Make it clear who needs to do what when the agreement completely falls apart. That way, you won’t be left scrambling when it does fall apart.

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