3 Traits of Excellent Contracts

 

 

As an attorney, one of the things people pay me to do is read and write contracts. After studying them in school, writing them for clients, and analyzing them for cases, I’ve concluded that there are 3 traits that you will see in the best contracts.

 

1. THE BEST CONTRACTS ARE CLEAR.

Without clarity, a contract is a potential minefield. No one knows what helps them or hurts them and if the wrong thing is trampled upon, the whole thing could blow up in everyone’s face.

In the best contracts, each person involved is clearly identified as a party, what is being exchanged is spelled out, and everyone involved knows exactly what is expected of them. 

If your contract needs someone else to explain gaps, it’s not good. Be sure that your contracts clearly shows:

  • Who the parties are,
  • What the important timelines & deadlines are,
  • How payments will be arranged,
  • What promises have been made (warranties/guarantees), and
  • What happens if someone messes up.

An unspoken by product of this clarity, is that the contract is understood by the parties. If the parties do not understand what they’ve just contracted to, this could pose a problem in fulfilling obligations, and then could further jeopardize potential cases in court.

 

2. THE BEST CONTRACTS ARE THOROUGH.

A great contract thinks beyond just the surface. It addresses the what ifs. It lays a foundation for the plan B just in case something happens. It provides definitions for confusing words and context for the third party reader. It leaves little to chance. If you’re selling an item and all you have is “I, _____, am selling _____ to _____ for x dollars," you’re not really protecting your interests because you have not thought through your full expectations.

See, the purpose of a written contract is not to fulfill some legal requirement. An agreement might exist without a sheet of paper ever being signed. A written contract is a tool of expression. It speaks for the agreement. Be thorough and speak clearly.

 

3. THE BEST CONTRACTS ARE TRUE.

An amazing contract tells the whole truth of the agreement. It doesn’t neglect details in detriment to one party. It doesn’t leave important factors out. It is honest and it is something all the parties can agree on. Each party may realize that they have given up one or two things in the simple art of negotiating, but no one is signing with the mind to finagle their way out  of the contract or defeat the purpose. 

When a contract is simply honest, the risks associated with entering into the agreements plummet. It includes basic things, like being legally valid. There's less to argue about. Everyone involved can than focus on simply getting things done. 

These 3 traits listed above incorporate the underlying What have been your experiences with contracting as a small business owner? Share your best and worst contract stories below.