Contract Creation 101: A Comprehensive Guide

Contract Creation 101: A Comprehensive Guide

Contract creation is a critical task that requires understanding the specifics and nuances of legal language. Agreeing with another party can be challenging, no matter the context. Whether trying to close a business deal or come to an agreement with a family member, it is essential to do it correctly.

Writing a contract requires careful consideration of all the elements that you should include. This guide will provide all the guidance needed to create a comprehensive contract agreement that meets your needs.

Table of contents

Does a Contract Have to Be Written to Be Valid?

A contract is a legally binding agreement between two or more parties that outlines your agreement’s terms and helps protect your interests. Without it, there is no guarantee that the other party will uphold their end of the bargain.

Contracts can be verbal or written, but most business contracts are written. This document should be legible, signed by both parties, and dated.

In some cases, oral or verbal contracts are also legally binding. If both parties trust each other, a handshake is all that is needed to reach an agreement.

However, such verbal agreements can be difficult to enforce, and they provide no clear record of the contractual terms. So, while oral contracts are still legally acceptable, it is best to write essential agreements.

Here are situations where you need a written contract:

  • real estate sales
  • transfer of wealth
  • marriage contracts
  • employment contracts
  • long-term agreements (terms lasting longer than one year)

Can Anyone Create a Contract?

No. A person can only make or enter into a contract if they are:

  • of the age of majority (not a minor)
  • of sound mind (mentally capable)
  • not disqualified by law (not a law offender)

Otherwise, you can create a contract, knowing what you should include and understanding the required language. If there is any doubt about certain elements or terms of the agreement, it is best to consult a lawyer.

Elements for Contract Creation

Here are the essential elements for contract creation:

  • Offer: the agreement that one party makes to another.
  • Acceptance: when one party agrees to the offer of the other party.
  • Signatory awareness: both parties should be aware of the specific language used in the contract and their rights therein.
  • Consideration: both parties must provide something of value to bind the agreement, whether money, goods, or services.
  • Legal Capacity: all parties involved must be legally capable of agreeing.
  • Legality: a contract is binding and enforceable if it meets the legal requirements in your area or state.

What Is a Clause in a Contract?

After identifying the offer, acceptance, and intention, the clauses usually follow — setting out specific provisions for both parties.

There is no limit to the number of clauses you can put in a contract. Clauses can cover practically every aspect of the deal. It dictates how each party should act and what happens in case of a breach.

Here are some common clauses:

  • Choice of law clause
  • Arbitration clause
  • Force majeure clause
  • Governing law clauses
  • Merger clause

How Does the Court Interpret Contracts?

Contract interpretation is usually needed when a dispute arises or when more than one party commits a mistake. It may also be required if the parties involved in the contract need to correct something. Then the court should interpret the contract based on the following:

  • The intention of the parties: a judge or jury will look at the contract and determine what the parties meant when they wrote it.
  • The plain language of the contract: if the language is clear, the court will interpret it based on the plain meaning of the words.
  • The purpose of the contract: the court will interpret an agreement based on what they intend to accomplish.

In some cases, a contract interpretation may need:

  • External evidence: may be a witness or a document and record showing discussions of how they use the contract terms.
  • Parol evidence rule: refers to evidence of an agreement that is not in the form of writing. This includes any oral agreements before they sign the contract.
  • Specific control over general: means that if two terms apply to the same situation, the particular term that deals with that situation takes precedence over the more general term.

To avoid misinterpretation in an agreement, you must understand how to create contracts.

How to Create a Contract

How to Create a Contract

Preparing and writing a contract agreement involves more than just including all the essential elements and clauses. Follow the steps on how to create a contract outlined in this guide.

  1. Review any notes from your past meetings with the other party. This will help refresh your memory on any details you need to address. If there are any points of confusion, clarify and ask questions until everyone is on the same page.
  2. Select the type of contract that is appropriate to use. Start making a draft. Include all relevant information of every party. Write an introductory paragraph and specify the deal’s details, such as dates and terms of payment.
  3. Include a section listing any key terms and definitions. Avoid using technical language or jargon. Delineate any unclear areas and work with the other party to resolve them. You can confidently move forward with a clear understanding of the contract, knowing that all parties understand the deal.
  4. Explain in detail the scope of the deal. This includes the deliverables, the roles and responsibilities of each party, and any payment, goods, or services each party must provide. Use simple language to reduce ambiguity and avoid misinterpretation.
  5. Specify the terms of payment. This includes the due date, the method of payment, and a list of deadlines. Be sure to account for any incentives or penalties for missed deadlines.
  6. Outline any risks and liabilities that come with the agreement. This helps ensure that all parties are aware of potential risks and allows them to make informed decisions.
  7. Include a dispute resolution clause. This outlines the process for resolving any disputes that may arise and can help all parties reach an amicable agreement without going to court.
  8. Create a signature page that all parties must sign to make the agreement official. This ensures that everyone involved is aware of and agrees to the terms of the contract
  9. Finally, review and revise your contract as needed. Check for any inconsistencies or vague language and ensure all parties agree.

You’re all set. You can start writing your contract now. However, it sounds challenging. It can take a lot of time and effort to draft an agreement.

The Importance of Proper Contract Writing

Creating a contract agreement involves more than just putting all the elements together. If contracts are correctly written, they will more effectively protect your interests and ensure that the other party meets their obligations. Moreover, it can help you:

Avoid lawsuits

A properly written contract can protect you from breach of contract lawsuits. It will clearly define the rights and obligations of all parties so that you can resolve any disputes quickly and amicably.

Prevent misunderstanding

A properly written contract will help ensure that all parties understand the terms. This will reduce any misunderstandings that may arise later and make resolving disputes easier without going to court.

Ensure compliance

By writing an unambiguous contract, you can ensure that all parties comply with the terms of the agreement. This will help ensure that all parties are held accountable for their actions and can prevent legal issues from arising in the future.

Resolve any disputes

An effective contract can provide a clear roadmap for resolving any disputes. For instance, it can provide a clause that defines the process for arbitration or mediation, which can help both parties resolve the issue without going to court.

Recover damages

There may be times when one party fails to fulfill their obligations under the terms of the agreement. In these cases, a properly written contract can provide a way to recover damages, such as lost revenue or missed payments.

Creating a contract agreement is essential and should be taken seriously. This is where Fill can help.

Hassle-Free Contract Creation Using Fill

Why start from scratch when you can create contracts the intelligent way? Try Fill, an intuitive, easy-to-use contract management platform for creating contracts quickly and accurately. Build your contract from our range of customizable templates, or make your existing document fillable.

Our drag-and-drop interface lets you quickly add, remove, or edit any fields and clauses. You can also promptly request signatures or share the document with other parties.

With Fill, you can draft contracts quickly and accurately while ensuring compliance with state or federal rules. Experience the convenience of easy contract creation with Fill. Get started for free.

Loida Bauto

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