What is a Contract?
A contract is a document that details the mutual understanding of two or more parties over the exchange of goods and/or services. It is a legally enforceable document. And, failure to comply with any of the terms and conditions set forth in the contract may warrant the discontinuation, removal, and/or invalidity of the agreement.
How to Write a Contract
The guidelines set forth below are meant for anyone who wants to create loophole-free and worthwhile documents that facilitate better contract management practices. Whatever type of contract you are making, follow the tips below and you will surely create a more efficient and reliable contract process.
1. Negotiate the Contract Terms
An expertly written contract starts with the right terms and conditions. Talk to or have a meeting with a potential client, partner, or employee first in order to lay out the groundwork of your agreement.
Discuss all aspects of the business transaction, the benefits, associated costs, and expected results before committing to any written contract.
2. Use Clear and Specific Verbiage
Once the terms of the contract have been mutually decided, make sure that the document uses clear and specific verbiage. Doing this will help you avoid misinterpretations and potential lawsuits in the future.
3. Consult an Attorney
If it’s your first time crafting employment, business, construction, real estate, sales, service, or payment contracts, consult an attorney who can first review the agreement terms. With a lawyer-approved contract, your own and your business’ interests are taken into consideration first.
4. Follow a Standard Format
For a more efficient contract-making process, it pays to follow a standard format for your contracts. The internet (and our website) is filled with printable templates that you can customize to match the specific terms, parties, conditions, and clauses you want to include on your own agreement.
5. Use a Contract Management Software
Studies by the International Association for Contract and Commercial Management shows that businesses can gain as much as a 9% increase in yearly revenue1 just by following good contract management practices. This includes the use of pre-made contract templates and the creation of a streamlined contract-making process.
6. Add Confidentiality or other Relevant Privacy Clauses
Another important step in the creation of a contract is the addition of relevant privacy and confidentiality clauses. Adding these clauses protects you and your clients from any undesirable actions that will affect the achievement of the terms of the contract.
7. Set a Short Contract Creation and Approval Time
In a survey conducted by SpringCM, a cloud-based contract management company, 46.2% of the respondents reported a long (talk about months) turnaround time2 for the creation, approval, and enforcement of a contract. This, in turn, may cause contracts to lose their value.
If you are a sales-oriented business, this contract value loss may manifest in issues with pricing, contract scope, project timeline delays, subcontractor service failures, or budget overruns.
Avoid all these by simply making sure that you set a short turn-around time between the creation and approval of any contract you create.