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3 Keys to Structuring a Contract

Before you draft any of the provisions, you need to consider how you will structure the contract. In a nutshell, think about what to include, how to organize it, and ease of reading.

1. Consider the principles of contract construction. A contract is a form of communication that a diverse audience (e.g., the client, the other party, a trier of fact if it becomes the subject of litigation) will read and use. Make sure that it fully, clearly, and accurately describes the transaction and that it protects the rights and responsibilities of the parties to the contract such that all interested persons can understand and agree to it. Contracts should be as succinct as possible while still being comprehensive. Each provision should serve a specific purpose in the transaction; if it doesn’t, or if you can’t explain its significance, cut it out. Just because a provision was in a form document or an earlier agreement doesn’t justify its inclusion in a new agreement.

2. Organize the agreement in the most effective way. The presentation and organization of an agreement can significantly improve its effectiveness. Here are some general principles of organization:

  • General provisions should come before specific provisions.
  • Major provisions should come before minor provisions.
  • Provisions that will be used more often should come before provisions that will be used less often.
  • The rules should come before their exceptions.
  • Permanent terms should come before temporary terms.
  • Technical and housekeeping provisions should come at the end of the document.

Depending on the transaction, however, it may be better to stick with the typical organizational structure of other agreements of the same kind, because both counsel and clients will be accustomed to seeing and will expect to see certain provisions in a certain order in that type of agreement. Keeping to the normal organizational structure for these agreements will help the parties in review and interpretation of the agreement after it’s signed.

3. Make it readable. All contracts, not merely those involving consumers, should be as readable as possible. Mechanically, this means that the font should be large enough to be visible and legible, and margins should be wide enough to allow the reader to note any comments. If space or the format of the final contract is a concern, you may want to print drafts in a larger font than the final contract. For contracts that will be more than a few pages, consider having a table of contents at or near the beginning and then grouping related provisions together.

Whether you’re new to drafting agreements or you want to learn new techniques, turn to CEB’s Drafting Business Contracts: Principles, Techniques and Forms.

Other CEBblog™ posts you may find useful:

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