How to write a contract

How to write a contract

There is no set answer as to how to write a contract. Contracts vary depending on the business deal they relate to, the types of businesses involved in making the contracts, and the terms which have been negotiated.

However there are core components which we would incorporate into any basic business to business (B2B) contract.

Below we look at the core components in more detail. A future blog we are writing will look at consumer contracts but if you want to find out more information about consumer rights under the Consumer Rights Act 2015 visit the Which website.

How to write a contract – Key parts to be covered in any B2B contracts:

 

1. Parties – make sure you clearly identify who the parties to the contract are. This is especially important when you are dealing with a legal entity such as a limited company or a partnership. Although your negotiations may have been with an individual from that entity it is important that the contract reflects the true identity of the party you are contracting with (e.g. XXX Limited).
2. Definitions – you should ensure to define key words which are consistently used throughout your contract.
3. Contract Term – this makes clear how long the contract is to exist for, and it can include details of any renewal periods and processes relating to how the contract may be renewed.
4. Obligations of Parties – it is very important to include clear details about what each party has agreed to do as part of the contract. For example if you are supplying goods you will want to make clear what you are supplying, when you will supply them, and how the goods will be delivered.
5. Payment and Payment Terms – this is often where commercial deals fall down, when payment terms are not clearly agreed and set out. You should set out how much is to be exchanged between parties, when payment will be made (for example are there any deposit payments required), and also include payment methods. You can even explain what will happen in the event of a party’s payment becoming overdue.
6. Limitation of Liability – this is the most important clause in the majority of business contracts. It is the part of the contract where you can put a cap on the amount you would have to pay to the other party if you do anything wrong whilst performing the contract (for example you fail to provide the services within timescales agreed in the contract, or the goods you supply are damaged). Limitation of liability clauses must be written with care otherwise you could open your business up to unlimited liability of an uncapped amount should a successful case be bought against you.
7. Termination and consequences of Termination – termination clauses explain how either party can bring a contract to an end by providing notice. They also may explain the circumstances in which a party can immediately bring a contract to an end for example where the defaulting party fails to make a payment due to the other party.
8. Confidentiality – protecting your business information and data should be of paramount importance. Confidentiality clauses should clearly define the information and data you wish to protect and provide limitations on how the other party may use that information.

 

How to write a contract – GENERAL

 

1. Ensure your contracts are written using plain and clear English.
2. If you are writing a tailored contract, rather than standard terms and conditions which are used with all customers, ensure the contract reflects the terms which have been agreed between the two parties.
3. Ensure your terms are clearly written and understandable. The last thing you want to do is write a contract which includes terms that are ambiguous.

 

Contract writing is not an easy skill. Given their technical nature it is pertinent that you should ideally seek expert advice when developing a contract to ensure you cover all bases and protect your business. Contracts4You’s consultants have the relevant legal training and experience to guide you through the contract writing process – in other words they know how to write a contract.

Contracts4You can support you from the outset of a business deal to help you identify risks which will need to be considered and squashed through the contract terms.

We will also be able to advise on other terms in addition to the above which you may want to consider including in your contracts for example indemnity clauses, or a mediation and arbitration clause which seeks to avoid court proceedings if anything goes wrong.

This blog is merely designed to provide you with an understanding of the key areas which your contract should cover off at the least.

Get in touch with us if you are about to enter into a new business deal or you are starting a new business venture and are unsure where to start with your contracts.

We can even provide a free health-check on your existing contracts.

You can contact Contracts4You by emailing info@contracts4you.co.uk or telephoning 0800 699 0706.

You may also be interested in reading these other linked blogs:

What should be in a letter of engagement?

Tailored contracts versus off-the-shelf contract templates

© Contracts4You, ‘How to write a contract’, 2017. Contracts4You retains the copyright and all intellectual property rights in the contents of this blog. Unauthorised use and/or duplication of the contents of this blog without express and written permission from Contracts4You is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Contracts4You with appropriate and specific direction to the original content by way of web links.