How to Draft a Business Contract

Certain contracts are required to be in writing (such as contracts to sell real estate), but other contracts can be made orally. The problem with oral contracts, especially in a business transaction, is that memories fade over time and people forget what they promised to do. It is generally a wise idea to write out your contracts, even if the business transaction is relatively simple (such as an agreement to paint your neighbor's house). The key to drafting contracts, especially business contracts, is to spell out every aspect of the agreement.          

Suggestions

1. Title the document "Contract Between [Your Name] and [Business Partner's Name]." According to Barbara Child, author of "Drafting Legal Documents, Principles and Practices", every legal document should have a title.
2. Draft an introduction. This only needs to be a sentence or two. It should list each party's name and address, state the date the contract was entered into and provide a concise description of what the contract is for.
3. Define the terms used in the contract if your contract includes technical words or phrases or uses words in a way other than the common usage. For example, if the contract requires a person to perform work on some property, you might use the phrase "[Person's Name] Property." Define what this property means (address and landmark identification) in the definition section so that you do not have to continually spell out or describe the property in the body of the contract.
4. Use sections and subsections in the body of the contract to describe, in concise and simple phrases, the key aspects of the business transaction, including the parties' obligations, time frames, payment terms and schedules, and risks associated with the job.Give a copy of the contract to each party and tell them to read through it and to note areas where the language is unclear or where the contract detracts from what the parties agreed to. Revise accordingly.
5. Include space at the end of the contract for each party to sign and date the agreement. Provide original copies of the contract to each party.

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