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What to consider when drafting a contract

A contract protects parties to the contract when something goes wrong or can, in some circumstances, prevent something from going wrong. For that reason, when negotiating a contract, parties to the contract should know what to consider when drafting a contract.

Important elements of a contract

In general, a contract is a legally enforceable promise and agreement between the parties. To ensure it is valid, and enforceable, certain contract elements need to be met including:

  • An intent to make a contract by both parties;
  • Legal subject matter or, in other words, the subject matter of the contract cannot be illegal for it to be valid;
  • An offer made by one party to the contract;
  • An acceptance of the offer by the other party to the contract;
  • An exchange of something of value which is referred to consideration in contract language; and
  • Must be in writing in some circumstances but not all.

Contract acceptance is important and must mirror the offer. There are several different ways to accept an offer to form a contract. Acceptance may be made by clearly stating it or putting it in writing; fully performing based on the offer; promising to perform; or performing but performing improperly.

When drafting a contract it is important to ensure that all the requirements for a valid contract are met. It is also helpful to keep these components in mind when negotiating a contract. A contract that is thoughtfully drafted and carefully negotiated can provide important protections in the event of a contract dispute or may help avoid contract disputes down the road. Familiarity with contract requirements is an important first step to negotiating and drafting a contract.

 

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