How to write a contract
If you are drafting a contract, there are crucial things to bear in mind. We look at what you should include in order to avoid conflict and help your business agreement run smoothly.
What you need to include in a commercial contract:
- Who
- What
- When
- Where
- How
We have seen some bad examples of contracts that have been drawn up in a bid to save money, the key is to keep it simple otherwise you could easily become embroiled in an unwanted dispute.
1. Who?
Who are your parties in the contract? Have you got their address? Have you got their Companies House number? You might need to serve them notice so it is essential that you have all the details right.
We have seen examples where contracts are missing company numbers and the company has changed their name. Or perhaps your supplier tells you their name is ‘An Example Company’ but you can’t actually find their company details on Companies House because you’re missing some details.
As soon as you know who you are dealing with then you can start to do your background checks, or credit checks, depending on if you are a supplier or buying in services.
2. What?
What is the commercial contract about, is it just to buy or sell something or is there more involved? Are there products, one product, or are services involved in the agreement? Is the product or service a standard “off the shelf” offering or will it be customised or bespoke? All of this would need to be specified to avoid any ambiguity.
We are trying to create some certainty around the ‘what’ of the contract to avoid contractual disputes.
Having a thought process that includes ‘and then, what if,’ ‘if this, then that’, ‘if this doesn’t happen, then that’ in contracts is crucial. Having these terms agreed and in place is trying to provide for the various things that go wrong and it would be sensible to have that covered when drafting a contract.
3. When?
When are you meant to be performing the contract? It is good to have firm dates and timescales in writing. Often as lawyers we try to get rid of anything that looks like an ‘agreement to agree’, this is where parties to the contract haven’t agreed what it is they want to do yet or that it is going to be agreed at some point down the road. An agreement to agree is unenforceable because it lacks the certainty required to form a contract.
Even if you cannot agree everything now, the best thing to do is to have a framework to getting to an agreement – timescales, a best endeavours obligation, whether that is good faith. It is wise to clarify what is good faith in the context of the contract as well. As well as what should happen if you cannot agree an issue.
4. Where?
Where will goods be delivered or services carried out? This is another reason why it is important to have all the correct contact details for the chosen parties of the contract. Delivering to the right address by a particular time could be crucial as part of the agreement. Guinness delivered a week after St Patrick’s Day might not work out well, or a service of helpful Elfs for Santa’s Grotto in January would be far from ideal.
5. How?
How is the service being carried out, or how will the goods be delivered? For example, who is responsible for unloading the goods, or for any customs duties? These are crucial things that should be considered and put in writing when drafting a contract.
Conclusion
If there is uncertainty in drafting a commercial contract then things can go wrong. One party might think the contract does one thing and another party thinks it does something slightly different. That difference of opinion, that uncertainty, creates friction.
Friction never helps in trying to achieve a business goal. It puts one, or both parties, immediately on the defensive trying to justify its actions, rather than looking at the commonality on what the parties can agree on. What does this do for the relationship?
The best contracts are the ones that are signed, put in a drawer and never looked at again but more often than not, these are the ones where the most thought and planning has been put in at the outset. We don’t see this as a coincidence.
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