How to protect yourself with an effective contract in a cost-effective way
What do I need to include if I draft my own contract?
These are the things which must be included:
- The names of the parties
- A precise description of the product or service to be supplied
- The amount payable, and when it is payable
- Any essential conditions
In addition, there are dozens of extra things which should be included depending on the type of contract (these are included in the full article – see the last paragraph at bottom of this page).
What if an agreement evolves out of a series of discussions?
This is where most problems occur, even if part of it is in writing (e.g. through an exchange of emails). To minimise the chance of a problem occurring, record all the commercial terms in clear, precise and unambiguous writing. Ideally get the other side to sign a copy but, if this is inappropriate, at least send them a comprehensive email confirming all the terms of the agreement. Remember that the devil is in the detail, or the lack of detail.
When should you get a contract reviewed by a solicitor?
This is wise if the contract is important to you or there is a possibility that you could incur a liability which may be disproportionate to the value of the contract. If so, and your budget is limited, you can save money by limiting the scope of the review so that you only get legal advice on those questions which you think you need answered. However, please keep in mind that what is missing from the contract is often more important for your protection than what is included. This usually needs an experienced eye to pick up.
What happens if the transaction proceeds in a way which is different to the contract?
It is not uncommon for an agreement which has been negotiated, drafted and signed to be put in the bottom draw and for the parties to proceed in a way which is different to the written terms and conditions. If so, it is important to up-date the written contract.
What else do I need to know to end up with an effective contract?
The quality of the result you get (i.e. the contract) depends on:
- How well the agreement has been negotiated (see Negotiation)
- Who drafts the contract (it is an advantage for your lawyer to do the drafting).
- How experienced the lawyer is at contract drafting the type of contract you need.
- Whether you want a Rolls Royce contract (rather than a lesser quality).
- How well you instruct your lawyer i.e. how comprehensive the commercial terms are.
- Who the contract is with – if it is a company, think about a personal guarantee.
How do I get a really good contract without it costing a fortune in legal fees?
Ask your lawyer this question. If he/she doesn't answer it adequately, perhaps you should look for a law firm who is interested in delivering better value-for-money legal services.
- A written 'wish list' of the commercial terms you want will enable your lawyer to recommend additional terms before you start the negotiation.
- When the commercial terms have been negotiated, prepare a 'term sheet' for your lawyer to check first then for the other party to confirm. This avoids wasting money on a lawyer drafting clauses when the detail has not been agreed to (despite what you may have thought).
- In some circumstances you could attempt to draft the contract yourself and give it to your lawyer to check. If you send it to us, we will do a preliminary review of it free-of-charge.
- Ensure you use a lawyer who is 'commercial' so he/she can advise you on practical (rather than legalistic) ways of achieving an outcome - this is both cheaper and more effective.
- Using a junior or less experienced lawyer at a lower hourly rate is often a false economy because it will take them longer and you'll still have to pay a senior lawyer to check it.
- Make sure the contract is not over-engineered i.e. that it, and its cost, is commensurate with the importance of the transaction.
What type of contracts does Business Lawyers Online specialise in?
We have a lot of experience in negotiating and drafting the following types of contract –
- partnership agreement
- shareholders agreement
- confidentiality agreement
- heads of agreement
- joint venture agreement
- business sale agreement
- licence agreement
- software licence agreement
- information technology agreement
- distribution agreement
- intellectual property agreement
- terms of trade
- supply agreement
- company purchase agreement
- reviewing business contracts and business agreements
- employment agreement
- commercial lease
- retail lease agreement
- contract for sale of land
Full article
The above is a summary of the article What all businesses should know about trading terms, making agreements and contract law. The full article can be obtained by completing the Contact us page.