A well-written, iron-clad contract is one of the keys to building excellent professional relationships. Not only does it stipulate the terms and conditions of your agreement, but it also mitigates risks and maximizes profit and savings.
Conversely, a poorly written contract can cause disputes and cost your organization money. So it goes without saying that you must devote ample time, energy, and effort to writing solid contracts to grow a successful business.
In this article, we will explore what constitutes a good contract. We will discuss the essential elements of a contract and some helpful tips when writing an agreement.
Table of Contents
- What Are The Different Types of Contracts?
- How to Write a Well-Written Contract?
- What Are The Elements of a Contract?
- How Can Fill Help With Contract Management?
- Final Thoughts
What are the Different Types of Contracts?
Contracts come in many forms and lengths. Before we discuss the essential elements of a contract, let us first get to know some of the most common types of agreements you can come across.
As the name implies, a fixed-price contract refers to an agreement where the seller or provider asks for a fixed compensation in exchange for a product or service. Both parties know the amount that should be paid and received from the beginning.
For this type of contract, the provider will determine the cost of the product or service once the project is completed within the contract’s given time frame. One of the essential elements of a contract of this type is that both parties should establish a price ceiling to avoid any issues. The contract can stop work once they’ve reached the limit.
This type of contract refers to an agreement wherein all involved parties have their obligations to fulfill. Bilateral contracts are relatively common in sales deals. One party must deliver a particular type of good or service in exchange for compensation. The contract might be considered breached if any parties fail to deliver what is agreed upon.
One defining element of a contract of this kind is that the other party has very little say about the terms and conditions of the agreement. This contract is relatively common in insurances wherein the coverage and premium are fixed, and the buyer can either take it or leave it.
How to Write a Well-Written Contract?
Now that you know some of the most common types of contracts, let’s move on to some of the best tips and tricks to help you draw a well-written contract.
- Keep things simple. Contrary to popular belief, you do not need highly technical words and phrases for your contracts to be solid. As a matter of fact, it is strongly recommended to use terms that all concerned parties easily understand. Doing so prevents misunderstandings and misinterpretations.
- Spell out the details. Make sure never to leave anything out, even the smallest, seemingly insignificant detail. It’s ideal to elaborate on the terms and conditions to cover all bases. Don’t hesitate to get into the nitty-gritty. Include all the critical elements of a contract.
- Get everything into writing. Perhaps the most time-consuming part of a contract lifecycle is the negotiation process. When you finally agree on the terms, make sure to put everything into writing. Remember that oral agreements aren’t necessarily legally binding.
- Agree on conflict resolutions. No matter how much you spend time drafting and perfecting all the elements of a contract, there is no surefire way to avoid disputes. These things happen. To prevent things from blowing out of proportion, it is ideal that you agree on ways to iron out disputes and conflicts. You can even include this in your contract.
- Invest in the right set of tools. In today’s modern landscape, plenty of tools and software are made for contract management. These tools can automate many tasks and speed up the contract writing process while reducing the risks of human error. You can also sign up with Fill, an electronic signature application that simplifies your contract signing.
What Are The Elements of a Contract?
As previously mentioned, it is crucial to draw a well-written contract to ensure that all essential elements of a contract are present. Regardless of the type of contract you are making, you need to include the following for them to be valid and enforceable:
1. Contractual Offer
Your contract must clearly state the purpose of the agreement and its coverage. What does one want, and how much does the other party want to be compensated? It should also indicate each party’s roles, responsibilities, and obligations.
2. Contract Acceptance
The second essential element of a contract is the acceptance of the offeree. The acceptance must be explicit and communicated to the offerer. An acceptance can only happen once both parties have come to an agreement. Any counter offers can be treated as non-acceptance.
3. Signatory Awareness
Sometimes called Meeting of the Minds, the third essential element of a contract is that all involved parties must be fully informed and aware that they are entering into an agreement. They must recognize the legal standings of the contract they are signing. To put it simply, there must be consent on all sides.
4. Contractual Consideration
The fourth essential element of a contract is contractual consideration. What it is is the value that is agreed upon by all signatories. It could be goods, properties, or services. A contractual consideration need not include the amount of compensation. Just as long as it’s clearly stated what is to be expected, it already meets the legal burden of consideration.
5. Contractual Capacity
You might have heard the term “legal capacity,” which means that all parties entering the agreement are doing so according to their free will and aren’t influenced by anything. It also means they are of the right age, have no neurological impairment, and the like.
6. Contract Legality
The final element of a contract is probably one of the most crucial. A contract cannot be legally binding and enforceable if it does not meet the legal requirements within your legal jurisdiction. It’s always best to seek a lawyer’s assistance to ensure everything complies with the regulations.
How Can Fill Help With Contract Management?
Embracing a more digital approach to contract management can help make such a seemingly daunting task more manageable. By investing in a document signing tool like Fill, you do not need to deal with contracts manually. You can quickly sign contracts without needing to print any documents. You can access and sign them on your mobile devices, and it saves you time and money.
Fill uses the most robust security measures and military-grade encryption to ensure the safety and protection of your contracts. Fill is also HIPAA and GLBA compliant, making it an ideal tool for signing medical and financial documents.
A solid contract management system that’s efficient and effective is the key to a successful business. It should guide you through the entire contract lifecycle from start to finish, from creation to its conclusion. It also helps you ensure that all the elements of a contract are present and presented.