Advice on Contract Terms

Saturday, March 10, 2007

Whether your are forming a corporation or a small business, sooner or later you will find that some terms included in your business contract seems to be obscure or vague without proper understanding of some law provisions, especially if you go into a venture without a lawyer's advice.

A lawyer will probably suggest you start a business using a generic form as reference and then adapt the contract terms to your particular situation, since there are some terms commonly included in most business contracts.

However, it is important to write contracts in plain English rather than using legalese sentences, jargon, or archaic language. A contract with phrases that lack clarity can look pretty legal, but is often confusing for parties involved.

Contract terms must state the purpose of the document so use the word "contract" as header and feel free to add additional provisions not reflected in the document that you are using as a guide to write your own contract.

Avoid repetitive phrases as much as possible and do not include long sentences as a single paragraph. Contracts must be legible and easy to understand without feeling overwhelmed with too much text.

Business parties should be identified in the first paragraph, including their names and complete addresses spelled correctly. A simple typo in the name of a party may be costly over time, requiring legal action to make any amendment.

Also make sure to include definitions for those terms that you are including in the contract so your party can understand exactly what you mean with this or that, and do the same with any technical term included.

Numbering the contract's paragraphs and adding proper headings and punctuation marks will make your document more readable and easy to understand, but be aware that a misplaced punctuation mark and the words "and" and "or" could change the meaning of a determined phrase.

Of course, all contracts must be done in writing and you should make a copy prior to any modification, remembering to include the date on the top of the first paragraph every time.

Following this advice you are almost done, but once your contract terms have been defined, you need to ask a lawyer for a review prior to signing. Every time when possible, ask him or her about any question that arises while redacting your contract, no matter if it is the dumbest question you ever had. In business staying quiet with your doubts in mind can cost you a fortune.

Once approved, a contract must be read calmly, in full, and signed with ink other than black to distinguish original from photocopies, retaining one of those copies for your personal records.