Tips on How to Draft a Contract

Legally, a contract is a set of promises which one party can pursue legal remedies if a breach of those promises occurs. In layman’s terms, a contract is a legally binding agreement between you and the opposing side, and either side that does not hold up their end of the promise can face legal consequences.

Contracts should be drafted clearly and specifically to protect the interests of the parties when disagreements arise. The idea of drafting a contract might seem difficult. The more details you put in a contract the more complex it can be.

This post will discuss the process of contract drafting and guide you through dealing with contracts online.

Contract law falls under common law jurisdiction. This means that law enforcers rely on state statutes and court decisions in dealing with contracts. Overall, contract law is similar among all the US states, however, different states might approach certain contract elements differently. Therefore, you should always consult a licensed attorney when drafting or reviewing a contract.

Depending on the intention behind the contract, there are essential elements needed to draft a contract. These elements include an offer and acceptance; mutual agreement, capacity to contract, consideration, and other provisions.

In the early days, contracts had to be in writing in order to be enforceable. In the modern world, electronic contracts can be legally enforceable as long as they meet legal requirements.

When you draft a contract, you write provisions of it in what's called Clauses. Clauses are sections in contracts that cover specific terms of the deal, for instance, how goods should be delivered between you and the other party.

To be on the safe side, you should consult an attorney to go over your draft to see if it covers all the basics. However, you should be aware of the key things below:

• The contract should clearly state who the parties to the contract are. It should mention their actual and full names; and addresses. Keep in mind when stating names, you don’t want to end up mentioning a name that might be a duplicate. If you were to mention the First Bank, there might be many banks with similar names. It would be better to say that this agreement (“Agreement”), is between John Kerry and First Bank of Washington DC, with headquarters at (bank’s address). This will ensure that there won’t be a dispute as to who is agreeing to the contract.

• You should state the rights and obligations of each party in detail. For instance, a website builder should provide a functional website and if you don’t pay, they have the right to take down the website.

• The contract should also state payment terms and conditions, such as paying for the website within 30 days of its delivery.

• Moreover, the contract should outline how the contract can be terminated, the country’s law that will ultimately govern the contract, and other terms.

• How disputes ought to be resolved, such as through arbitration or by small claims court.

Nowadays, many contracts can be signed electronically. However, it is better to sign and accept the terms of the contract in a physical form. Even some legal experts suggest having the contract notarized and stamped. On the contrary, signing contracts online has become the norm and many companies and people commit to it.

Since 2000 many electronic signatures have been legally enforceable. Federal legislation, Electronic Signatures in Global and National Commerce Act (ESIGN), along with state legislation which adopts the Unifrom Electronic Transactions Act (UETA), incorporate their own e-signature laws that ensure the enforceability of e-contracts regardless of where the parties are located.

Electronic contracts continue to evolve over time. The future of e-contracts are smart

contracts - these types of contracts incorporate terms and conditions using lines of code.

Smart contracts are a great fit for direct transactions where the parties do not require legal enforcement, central authorities, or law enforcement. They implement penalties for breach of contracts automatically and obligations are defined clearly. They are used for exchanging money, shares, property, etc.

For instance, you could use a smart contract when renting an apartment. You could use a virtual contract to pay for the apartment through cryptocurrency, such as Bitcoin and you would receive the key automatically and the receipt would be held in the smart contract. In case, you don’t receive the key to the apartment, the blockchain tech would automatically issue a full refund.

Creating a contract between you and the other party is the best way to avoid disputes and meet expectations. To successfully draft a contract, you should be familiar with the basics of contract law, what the terms and conditions are required, how disputes should be approached, and how to manage various types of contracts.