Key Tips On What To Consider When Drawing Up A Legal Business Contract


Brenda Smith, Negosentro | Disclaimer: This article should not be treated as legal advice. It’s recommended that readers still consult legal counsel and contact a lawyer should they have any concerns regarding a legal business contract.

When we think of starting a business or improving our business, we tend to think about the long term. What could we do to improve profits, or what can we do that our competitors can’t? Perhaps one of the things that attract people to the idea of setting up a business isn’t solely the idea of profiting, but the idea of making a difference. Of course, running a business takes more than sheer imagination and enthusiasm, and there really are certain structures to follow in order to make sure there even is a business that can be the vehicle of our aspirations. An essential element is knowing key tips on what to consider when drawing up a legal business contract.

Given the topic, however, we should remember that this article shouldn’t be treated as legal advice. Not all businesses are the same, and therefore the information presented in this article is just a set of general guidelines and advice. You should consult a legal professional with the specific details of your business, especially when you take into account the kind of business you have.

One thing is for sure, however, and it’s that when it comes to making sure your business is running correctly, you should make sure to know what you’re doing when drawing up a legal business contract.

According to Nolo, knowing what to check when drawing up a legal business contract is essential because while some oral agreements are binding and legal, they’re hard to enforce and especially difficult when the court is in question. Ideally, in a business setting, agreements are always best in writing, and this is much more so when we’re talking about legal contracts. These are much safer than oral agreements, and a document clearly dictates who’s involved and what their rights and responsibilities area.

Keeping it simple is perhaps a tenet that shouldn’t be forgotten when drawing up a legal business contract. These contracts don’t necessarily have to include complex legalese to have an enforceable contract.

  • Review with a legal professional if possible to make sure the terms of a contract are simple yet understood and with no room for misinterpretation. This makes a business contract understandable and simple for a lot of people, which can help avoid unnecessary lawsuits.

Try to use clear and short sentences with headings that alert everyone what’s included in a paragraph. Good formatting in a contract helps a lot of readers as this clearly divides parts of the contract that should be taken into consideration and clearly divides areas of attention and areas of description. This allows you to clearly define areas that should be read first with elaborations should they need more information.

Remember to be talking with the right person as dealing with a junior officer who always has to ask permission from the boss can waste a lot of time. This is especially true if they have to ask every single detail from their boss. Make sure the other party you’re talking with is the one with the authority to make decisions to bind their company and are interested to make sure they meet their end of the bargain.

  • If you’re not sure who to talk with, remember to ask to be redirected to the person you should be talking to, the real decision maker. This allows you to save valuable time and resources when it comes to drafting the terms of the contract properly. This person can be a chief executive officer in some companies.
  • This allows you to be able to identify members of the party correctly in the contract. It’s important you’re aware of the correct legal names of the entities in the contract so it’s clear which is doing what in the given contract. If a business has an LLC when it was organised, or if it’s a corporation, remember to include the LLC suffix or Inc., properly.

Remember to make sure the details of the contract are properly drafted so you can avoid confusion in the future. You should make sure the contract dictates the rights and responsibilities of each party in excellent detail, and don’t leave anything open for speculation. If there’s a need to discuss a certain detail with another party, do so in order to make it clear that these are the obligations you should do.

  • Ask your legal counsel on the specifics of making amendments when there are a few things that need to be changed as written amendments that are initialed by both parties so they can also become part of the contract itself.

Payment obligations should be specified and should be added in detail. Are you going to pay in installments, or are you going to pay if you complete the work? Specify the details needed, including the payment method. Employee compensation is a very sensitive topic so make sure that your contract covers every information an employee should know.

Try to make sure there’s a way to resolve disputes and that you’ve agreed upon the situations that could terminate the contract. These include missing out on deadlines; or in the case of dispute resolution, perhaps relying on arbitration and mediation.


Taking into account the legalities of business contracts, it’s likely that this part of running a business can cause some degree of confusion. After all, not all businessmen are lawyers, and there are intricacies in running a business that should be considered – especially when legal rights and responsibilities are in play. However, this doesn’t mean we shouldn’t do business contracts entirely, as there are legal professionals who are trained to handle the intricacies of legal business contracts.

In that regard, while we may leave the drafting of the actual contract to our legal professionals, it’s still important that we understand what goes on during the drafting of these contracts as these can greatly affect the way our business runs. The key tips above on what to consider when drawing up a legal business contract can be a gateway for you to learn about the specifics of business contracts, especially when we consider your particular business.

Brenda Smith is best known by her readers as someone who offers a modern take on common law topics. Brenda keeps herself fit and healthy by working out during her free time.

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