Let’s face it – contracts are the lifeblood of business, and contract drafting by extension is crucial, serving as the framework for countless transactions, partnerships, and agreements.
For any legal professional, mastering the art of contract drafting is essential. A well-drafted contract can prevent disputes, protect your client’s interests, and help ensure that the parties clearly understand their rights and obligations.
This guide is designed to walk you through the fundamental steps of drafting quality contracts.
Whether you’re fresh out of law school or simply needing a refresher, these practical tips will help you draft contracts that are clear, enforceable, and tailored to meet your client’s needs.
Step 1: Understand the client’s needs and goals
The foundation of any successful contract is a deep understanding of your client’s needs and goals.
Before you put pen to paper, it’s crucial to have a thorough discussion with your client so the contract you ultimately draft aligns with their objectives and minimizes potential risks.
Start by having a detailed consultation with your client. This meeting should focus on gathering all the necessary information about the transaction or relationship the contract will govern.
Ask open-ended questions to uncover your client’s priorities, concerns, and desired outcomes.
For example, if you’re drafting a service agreement, you might ask about the scope of services, payment terms, deadlines, and any potential contingencies that could impact performance.
Understanding your client’s goals helps you anticipate issues that may arise and draft provisions that protect their interests.
It also ensures that the final contract accurately reflects what your client wants to achieve and reduces the likelihood of misunderstandings or disputes later on.
Key questions to ask
In order to safeguard your client’s needs, consider asking the following key questions during your consultation:
- What is the primary purpose of the contract?
- What terms or conditions are non-negotiable?
- Are there any potential risks or uncertainties that need to be addressed in the contract?
- How does the client envision the contract being enforced if a dispute arises?
- Are there any industry-specific regulations or standards that must be considered?
Step 2: Research relevant laws and regulations
Once you have a clear understanding of your client’s needs, the next step is to make sure the contract complies with all relevant laws and regulations.
Legal compliance is critical in contract drafting, as even the most well-written agreement can be rendered unenforceable if it violates applicable laws.
Compliance with legal requirements
Start by researching the laws and regulations that govern the subject matter of the contract.
This may include federal, state, or local laws, depending on the jurisdiction and the nature of the agreement.
For example, a contract involving the sale of goods might need to comply with the Uniform Commercial Code, while an employment contract would need to adhere to labor laws and regulations.
It’s also essential to stay updated on any changes in the law that could affect the contract’s enforceability.
This is particularly important for contracts that have long durations or that may be subject to future regulatory changes.
Keeping up with legal developments will enhance long-term validity and enforceability.
Identifying jurisdictional issues
In addition to general legal compliance, consider any jurisdictional issues that might impact the contract. Different states or countries may have varying requirements for contract formation, enforcement, and dispute resolution.
If the contract involves parties from different jurisdictions, you’ll need to determine which laws will govern the agreement and include appropriate choice of law and forum selection clauses.
Researching and addressing jurisdictional issues upfront can prevent future conflicts and ensure that the contract is enforceable in the appropriate legal venues.
Step 3: Be clear
This step is so basic that we won’t belabor it here. The clarity of the language used in a contract is one of the most critical factors in determining its effectiveness.
Each term and condition should be stated in a way that leaves no room for interpretation. For example, instead of writing, “Delivery should be made in a reasonable time,” specify the exact timeframe, such as “Delivery must be made within 30 days of the contract date.”
And while legal precision is important, it’s also crucial to avoid unnecessary legal jargon. Using plain language can make the contract more accessible and easier to understand for everyone involved.
For example, instead of using “heretofore” or “notwithstanding,” opt for simpler terms like “before this” or “despite.” The goal is to strike a balance between legal accuracy and readability, so the contract is both legally sound and understandable to all parties.
For more on this, I recommend reading this post.
Step 4: Include all essential elements
Quality contract drafting must include certain essential elements to be legally binding and effective.
Ensuring that these components are present and properly articulated is key to creating a contract that can withstand legal scrutiny and fulfill its intended purpose.
At the very least, every contract should include the following fundamental elements:
- Offer: One party must make a clear offer to do something, whether it’s providing goods, services, or something else of value. The offer should specify what is being proposed and under what conditions.
- Acceptance: The other party must accept the offer without alterations. Acceptance must mirror the terms of the offer exactly, or it may be considered a counteroffer rather than an acceptance.
- Consideration: This is the value exchanged between the parties, such as money, goods, or services. Consideration is what each party gives up to gain the benefit of the contract. Without consideration, a contract generally lacks the necessary element of mutual obligation and may not be enforceable.
- Mutual assent: Also known as a “meeting of the minds,” mutual assent means that both parties understand and agree to the essential terms of the contract. This is usually evidenced by the signing of the contract by all parties involved.
Step 5: Customize for specific agreements
While the essential elements form the foundation of any contract, additional clauses may be necessary depending on the nature of the agreement. For example:
- Confidentiality: In contracts involving sensitive information, it’s crucial to include a confidentiality clause to protect proprietary data.
- Indemnity: Indemnification clauses are often used to shift potential liability from one party to another, such as in service contracts where one party agrees to indemnify the other against certain risks.
- Arbitration: These can be included to stipulate that any disputes arising under the contract will be resolved through arbitration rather than litigation.
Tailoring the contract to include these additional clauses ensures that it meets the specific needs of the transaction or relationship it governs.
Step 6: Draft with enforceability in mind
A contract is only as strong as its enforceability. No matter how well-written a contract is, if it cannot be enforced (or meaningfully interpreted) in a court of law, it serves little practical purpose. Therefore, drafting with enforceability in mind is crucial.
Anticipate potential disputes
When drafting a contract, always consider the possibility of future disputes. I’ve told this story in this blog previously, but it resonates with me here.
I once spent many years of my life litigating the meaning of a contract that used two similar (but different) terms interchangeably – “dehydrated products” and “dehydrated food products.”
Our opponents argued the former phrase allowed them to use our client’s technology to make (and sell) any dehydrated product you can imagine.
The latter phrase – and the one my client intended – allowed our opponents to use the technology only to make food products. This small difference was worth millions of dollars.
It’s incumbent upon the lawyer to catch these minor inconsistencies, determine whether they might lead to disputes and – if so – eradicate them.
Review by litigators
Especially for purely transactional attorneys, it’s a good practice to have your contracts reviewed by people who have litigated contract disputes.
A litigator’s eyes can catch potential issues that you might have overlooked and can offer suggestions to strengthen the contract’s enforceability.
Step 7: Review and revise
Once you’ve drafted the contract, the next step is to thoroughly review and revise it. This is a critical phase where you ensure that the contract is free of errors, inconsistencies, and ambiguities.
Reviewing a contract should be a meticulous process. Start with a high-level overview to ensure that the structure and flow make sense.
Then, move on to a detailed line-by-line analysis to check for things like typographical errors, incorrect dates, or any factual inaccuracies.
Make sure that terms are used consistently throughout the contract (see above) and that there are no conflicting clauses.
Finally, identify and revise any language that could be interpreted in more than one way. The goal is to eliminate any potential for misunderstanding.
After your initial review, share the draft contract with your client for their input. It’s important to incorporate their feedback while maintaining the legal integrity of the document.
Sometimes, clients may request changes that could weaken the contract’s enforceability or clarity.
In such cases, it’s your responsibility to explain the potential risks and suggest alternatives that satisfy the client’s needs without compromising the contract.
Conclusion
Quality contract drafting is a fundamental skill for any legal professional.
By following a systematic approach – from understanding the client’s needs and researching relevant laws to drafting clear language, ensuring enforceability, and conducting thorough reviews – you can create contracts that are not only legally sound but also effective in achieving your client’s goals.
