It takes a lot of precision and expertise to draft a contract that both the parties are happy with. In contracts, every detail and every word matters; hence, it becomes imperative to avoid mistakes during contract drafting.
To provide contract drafting services, thorough understanding and trawling through all the significant details is the key! Lawyers strive to achieve the same by their undivided attention and diligence.
Tips by Lawyers to keep in Mind during Contract Drafting
1. Take a Review of an Attorney
Legal Assistant at Spera Law Group.
Contracts are a particular area of the law where an ounce of prevention is worth a pound of cure. We have clients who contact us all the time because they’re in a dispute involving a contract.
When we look at the contract, sometimes it works out in their favor, other times there’s some key language missing that significantly hurts their claim.
On the front end, it’s relatively cheap and easy to adjust the contract before it’s signed to give our clients better options in the event of a breach. But on the back end, sometimes our clients are left without any financially feasible recourse, and that’s never fun for our clients.
I hate to sound self-serving here, but the absolute best advice is to have an attorney review and discuss the contract with you before you sign it.
2. Understanding of Critical Issues
Attorney & CEO of Legal Advice Corp.
I like to have my clients verbally communicate to me a rough outline of the agreement, as they understand it before I put pen to paper. Usually, these are the issues that are foremost in my client’s mind, and I like to address their concerns first.
Next, before I begin to draft a contract, I like to address my thoughts on the contract with my client and hear their thoughts on my ideas. This helps both of us to become acquainted with the salient issues.
This process serves as a good starting point to discuss other critical issues that might have been previously overlooked by my clients.
Finally, I like to analyze all the contingencies and potential change of circumstances to troubleshoot and understand my client’s perspective under various scenarios.
3. Be Specific with the Terms
She is a leading divorce attorney at Gabrielle Hartley, Esq/ Better Apart Coaching, Co-Parenting, and Mediation.
I have had many poorly loose agreements pass my desk over the years that needed to be re-worked because of lazy drafting. For instance, “the parties believe they can work out a parenting plan that is fair and reasonable” is asking for trouble down the line.
Do yourself the favor of being specific with terms, and then you can always deviate if you agree to do so as you move forward. The clarity in all things contractual is king.
4. Examine Existing Forms and Templates
Attorney at Matthew Fornaro, P.A.
When drafting legal documents and contracts, one size does not fit all. However, that does not mean that you cannot use existing forms and templates to draft your documents.
You need to find a balance between efficiency and usefulness for the client. Generally, in drafting documents, you need to find out your client’s specific and subjective requirements and goals. With those in mind, you can start to draft a general document, refining it for your client’s specific needs.
You can use a prior or existing document as a form, but you must temper it with the current situation and requirements at hand. Ideally, you would want to have an ongoing draft of the document, sharing it with the client for review and comment as the process moves along.
Ideally, in the end, you will have collaborated with your client to produce the right document for them that meets all of their needs and requirements in an efficient fashion.
5. Proofread Carefully
Managing Attorney at Jordan Counsel LLC
The mistake I see most often arises from poor copy-and-pasting. Sometimes it’s from a client who copied clauses from something they found on the internet. As is always the case in such contracts, there will be something that, in the context of the client’s situation, will not make sense or will be disadvantageous for the client.
Other times, the culprit is another law firm that used a similar contract from one of their previous cases but neglected to change pertinent information in the contract (e.g., names, addresses, etc.). Remember that spellcheckers do not correct for such mistakes. Be sure to proofread carefully!
One mistake I sometimes see is the unintended omission of and or before the final item of a list wherein the different list items are comprised of long sub-paragraphs. So check your lists (especially the penultimate list items) and make sure it is clear whether they are intended to be additive (with and) or selective (with or).
In a contract, reference may be made to another part (e.g., a paragraph, section or annex) of the same contract. After a few rounds of revisions of the contract, the content may be added or deleted. Be sure those references to other parts of the contract use the updated number/letter, not an outdated one.
6. Make a Deal Memo
Business, Technology, Entertainment, and Licensing Lawyer
Having drafted thousands (literally) of technology and entertainment industry contracts over my 20-plus-year legal career, I recommend using the deal memo as a checklist for the initial contract draft.
And then, even more importantly, check your contract draft against the deal memo as both an intermediate and final step of the contract negotiation process.
While every contract does not begin with a formal deal memo, you likely will have a bulleted list, an email correspondence, or even notes from a conversation that indicate the contract terms of importance to your client.
Contract negotiations have many moving parts – and can move lightning fast, glacially slowly, or at any pace in between. That creates many opportunities for important elements to fall away or be forgotten during the process. Frequently referring back to the deal memo and/or your notes can recapture those elements.
7. Make the Contract Easily Understandable
Paralegal to Whitney L. Sorrell, JD, CPA, MBA at Sorrell Law Firm, PLC
When drafting a contract, it is most important to make sure that any person (think of people in a jury box without any knowledge of your business) can read the contract and clearly understand each party’s obligations under the agreement and the remedies available in case one party fails to perform.
It should include simplicity, clarity, and comprehensive details, all written in plain English, so it is understandable.
Don’t forget to address remedies. A contract might say X must do 1, 2, and 3. If the Agreement doesn’t follow the obligation with a remedy in the case X fails to perform, then the other party will spend a lot of time and money to enforce the contract.
If, on the other hand, the contract makes crystal clear the standard for determining whether a party performed (or failed to perform) and the consequences of remedying the breach, then the harmed party will have a direct and efficient means for prosecuting the breach.
8. Include Forced Arbitration Clauses
Founder and Lead Trial Lawyer at The Perecman Firm, P.L.L.C.
When looking to draft a contract, it’s important to thoroughly read through the document and ask yourself what should happen to the agreement, should someone refuse to comply with its terms down the line.
For instance, to address scenarios in which a party no longer wants to comply with the deal, the contract should include practical, inexpensive ways to enforce the parties involved to observe the terms of the agreement.
It’s not enough to be able to sue the noncomplying party because a lawsuit may require time and resources that are more trouble than it’s worth for your client to pursue. For this reason, it might be good for an attorney to consider including forced arbitration clauses within the contract.
For example, in a matter involving spousal support or maintenance agreement, the contract calls for an ex-spouse named Jim to make a payment on the first day of the month to his ex-wife named Cindy.
However, Jim is consistently late making payments, causing Cindy to chase after him every month for the money owed. Cindy can’t afford to hire a lawyer every time Jim fails to abide by the terms of their agreement.
To address this, the lawyer drafting the contract should write a penalty into the agreement that is significant enough for the parties to comply with the terms of the agreement.
For example, the contract can specify that if Jim does not make a payment to Cindy within the first three days of the month, he will owe Cindy a 20% penalty fee and even after he makes the regular payment, the penalty still applies. If he fails to make payments within the time allotted three times, the money owed automatically has to be paid to the court.
By considering the “what if” scenarios that may arise down the line and including proactive measures to address them within the contract, you can help ensure your client’s interests are protected long term.
9. Verify Thoroughly
Founder of Russo Law LLC
Do your diligence. Before you put the proverbial pen to paper, you should first obtain all of the information to verify what your counterparty is telling you. Without that information, it’s possible that you will overpay, get taken for a ride, or left holding the bag (depending upon what’s at issue in the contract).
And don’t be satisfied with emails or written representations of the other side. Everything that is true fact can be verified by an independent third-party. Whether its ownership/title, proof of funds, or expertise, there is a government entity, bank, or reference who can tell you if the other side is being upfront with you.
Be forewarned: If you don’t do your diligence, then you might not be able to assert later that you were fraudulently induced into signing the contract (which may make certain non-contractual damages available).
10. Don’t be Afraid to Ask for Changes
Founder, The Contract Whisperer | Contract Negotiations that Prioritize Relationships and Results.
The number one mistake made when negotiating contracts, especially with very large organizations, is being afraid to ask for changes. Even the largest companies are willing to consider reasonable requests that will enhance the relationship.
I represented a mid-sized client in connection with the online terms and conditions for the affiliate program of a huge multinational corporation. Nobody negotiates those! But there was one provision that was problematic for my client, and the organization agreed to the requested change. So long as you are reasonable, it is okay to ask!
11. Check Basic Responsibilities
He is the lead attorney of Engelhardt Law a business transaction and litigation firm. His legal analysis has been seen in publications including Forbes and Inc. Magazine.
I am a business attorney here in New York City. Contract drafting is a daily exercise for me. Here are a couple of drafting tips examples, and mistakes to avoid when drafting.
1. Avoid the “wherefores.”A basic at contract law is that a contract’s ambiguities are held against the drafter, that means if you are writing an agreement and you’re inserting terms that are vague, ambiguous or downright confounding, that can be very dangerous for you.
I had a client send me a contract recently written by a non-attorney that had a very confusing, clause. My recommendation was to keep the clause in the agreement as it would be held against the drafter, not my client.
2. Exclusio unius est expressio alterius. The only Latin from law school I remember. The phrase means if you mention only some things, the other things unmentioned are excluded.
Translation: do not list items at random in a contract. If there are a list of items for sale or lease or other, then itemize each item or you could get in contract trouble.
3. Don’t Overreach! Sometimes drafting contracts you have all the chips, and it may seem in your best interest to really put the other party in a bind. Be careful! I had a client recently that had a non-compete, but the terms were too long and too broad.
In part, due to poor drafting, my client walked away from his previous position essentially unharmed by the non-compete clause.
4. Print it out and read a hard copy. The last piece of advice is not a “don’t” but a “please do!” Print the agreement out and do a final read-through: line-by-line.
I do this with all my agreements, and I regularly find goofy typos that Grammarly or spell-check may have missed. It can save you from quite a bit of client embarrassment. Trust me on that.
12. Analyze all the Possible Situations
I am a business ownership lawyers and draft and review contracts all the time! | McBride For Business, LLC.
One of the keys to contracts is to think through all of the likely what-ifs. It helps if you have been in business for a while as you will know where the past problems were. If you haven’t been in business the experience of your lawyer can help or consult with other experienced business owners.
Once you know what “what-ifs” might go wrong then you can move on to the drafting. And the key of drafting is clairity around what-ifs.
As an example one type of contract I typically work on is partnership agreements. In the partnership agreement you need to be crystal clear on what happens if something goes wrong.
A partnership agreement that says “we’ll reach an agreement about the business if we disagree” is ineffective (I’ve seen many people use such provisions that came to my office after a problem).
Instead anticipate potential problems and have a direct solution to those problems if they happen. For instance, if we disagree we will sell the business and split the proceeds. This is mechanical and doesn’t require an agreement after a disagreement has started.
13. Make a List of Issues
Naples Divorce Lawyer
I’m a divorce lawyer and every agreed divorce is finalized by the parties entering into a marital settlement agreement. We all use templates to draft the marital settlement agreement. Divorce settlements are so varied that no template could possibly include every possible issue for every possible couple.
Instead of just diving in and adding to the template, a lawyer should make a list of all of the issues to address in the agreement and then include those issues into the template. This insures that you don’t miss any issue.
14. Whether to Arbitrate or Litigate?
Board Certified Business Litigator + Legal Author + Arbitrator + Mediator
I’ll give you two common points. I’d urge you to state that the lawyers commenting are not giving legal advice to readers, but merely commenting on best practices.
Beware of one-size-fits-all contracts. Often a client comes to me with a “contract from the Internet” as a starting point or has been using that contract in their business for some time.
This is dangerous if the model contract has disadvantageous terms, generally, and particularly if the client has imposed another state’s law or placed any prospective dispute in a foreign state’s jurisdiction.
So while it’s okay to buy off the rack, mostly every contract can benefit from some tailoring if it serves the client’s best – and particular – interests.
Arbitrate or litigate?
For the past couple of decades that I have been in practice, the trend towards diverting controversies away from litigation and into arbitration seems to have cooled. Why?
Because commencing an arbitration can present considerably more upfront cost to a client, discovery practice in arbitration grows closer and closer to what we see in litigation, and in most arbitral forums there is little relief by way of an appeal. There are good reasons to go in either direction for dispute resolution, but hash it out before selecting.
Contract drafting is a crucial task and should be taken seriously. The tips mentioned above by professional lawyers throw light on the essential things to keep in mind during contract drafting. We see that diligence and proper understanding is a must for efficient drafting of contracts.