How to Make a Legal Business Contract
- 1). Name the parties by actual and legal names. Shortening names (e.g., "Edgar Allan Poe, hereinafter referred to as 'Poe' ") or by designating the parties as "Offeror" and "Offeree" or "Promisor" and "Promisee", will make the contract more easily understood, shortened in terms of length, and more reader-friendly.
- 2). List the legally-valid consideration that the parties are receiving in return for promised performance. Some contract writers like to state the consideration as "$1.00" but this generally isn't legally beneficial. It is best to state "in return for the mutual promises hereinafter described." A good example would be a contract for landscaping services. "Promisor agrees to undertake and perform satisfactory landscaping services for Promisee in consideration for payment by Promisee in the amount of $1,000.00."
- 3). Describe the subject matter in detail. In the previously-cited example, the subject matter consists of the detailed landscaping services that must be provided such as trimming trees, gardening, mowing lawns, watering plants, installing an automatic sprinkler system, and making any necessary adjustments to the sprinkler system.
- 4). Describe the terms and conditions for performance by the parties, including a definite time for performance. For example, "Promisee shall pay Promisor the sum of $1,000.00 on or before June 1, 2011," while "The Promisor agrees to complete the aforementioned services on before June 1, 2011."
- 5). Describe possible remedies available for breaching the agreement. For example, "In the event Promisor does not complete performance on or before June 1, 2011, Promisee may, at his discretion, declare the contract terminated and shall be entitled to a refund of any monies previously paid to Promisee by Promisor. Further, the Promisee may, at his discretion, be released from paying any further compensation to Promisor."
- 6). Provide contact information for the delivery of any notices to the parties to the agreement.
- 7). Include a mandatory arbitration clause in the agreement, if that is desired. Arbitration can substantially reduce legal and court costs.
- 8). Include a clause relative to reimbursement of attorney fees and costs of suit in the event of a legal dispute arising under the terms of the your agreement. Many courts require this clause to be included in the agreement in order for the prevailing party in a lawsuit to collect such fees and costs.
- 9). Provide clauses for confidentiality, non-disclosure, "reasonable" non-competitive covenants, and protection of trade secrets enforceable by, among other things, injunctive relief.
- 10
Provide a liquidated damages provision, if desired. Liquidated damages are estimates as to the damage caused by a contract breach by one of the parties. - 11
Include a severability clause. This permits enforcement of the remaining terms and conditions of the agreement even though one or more contract terms are deeded void or voidable. - 12
Sign the contract and provide a copy to each party to the agreement.