How to Write Business Contracts That Are Easy to Understand

Want to learn how to write a business contract that’s easy to understand? 

Well, you’re in the right place. We believe that contracts don’t have to be confusing, in order for them to be enforceable. 

In this article, we will cover the cons of a poorly-made business contract and the most important aspects of simple contract creation.

Keep reading to find out more.

The Cons of A Poorly-Made Business Contract

There are many things that go wrong, and many things that can make a contract bad. For the sake of example, we will provide only some scenarios.

In general, a contract is poorly-made when it is:

  1. Not in writing (an oral contract is risky and holds no proof of terms)
  2. Does not cover responsibilities and rights of all parties involved
  3. Has ambiguous language or contradiction, thus creating a stall when a problem needs to be resolved
  4. Has no termination clause
  5. Has no end date
  6. Does not cover the transaction/payment details

The issue with a poorly-made business contract is that they lead the parties in a single direction, and that’s to a state of confusion. By having bad contracts, you lose customers, you miss payments, and, in some cases, have to default on the entirety of the enterprise. 

If you cannot resolve the issue, the resolution of it will end up in litigation, which is not free. A bad contract equals hard-working lawyers, thus increasing business expenses.

To write business contracts that are easy to understand, and which hold true to their value, follow these tips. 

Write With Yourself In Mind – Simple Language, Simple Reading

A business contract does not have to consist of legalese and difficult jargon. By no means does that make it more enforceable, or have greater power over a contract that uses simple language. 

The best contract is the one written in simple English, where both parties have comprehended the entirety of the terms, and then signed for it. Now, simple language does not mean a careless approach. On the contrary, by using the simple language you have to provide as much detail and be as specific as possible as to the remedies and obligations that are present within the compounds of this contract. 

However, some things cannot be placed in simple language, such as legal terms, which hold specific meaning in law. For making it even easier to understand, number and label each paragraph, and include a single topic for each paragraph. 

By separating the contract into a well-organized table of contenders, the parties will have an easier time understanding the concept within the context of the contract.

In any case, the easiest way to create a simple contract is to use a contract template from ApproveMe.

Be Specific, Really Specific

We cannot stress enough how important it is, to pay attention to detail.

The obligations, rights, remedies for each party have to be written down in such specific language that does not account for any other interpretation. As it is written, it is understood. 

If you need delivery on the 17th of each month, use that number, don’t write “in the midst of the month.” If both parties agree to a new term or would like to change an existing one, write an amendment in the contract, don’t just speak it to each other. 

The courts will not accept the oral agreement as part of the contract.

Cover All the Bases – Especially Financial 

Most contracts cover a transaction of some sort, thus it involves commerce. It’s important to note how payments or trade will be performed. If you would like to pay half up front, and the other half in installments throughout the term of the contract, write it down. 

If you contract a party to remodel the rooms in your office, you can state the regular payments are contingent upon the number of rooms that will be remodeled to your satisfaction. 

When possible, write down the dates, the requirements, the methods of payment, and everything else pertinent to the transaction. 

Most disputes over contract have a money-centered interest, so be very detailed.

Don’t Forget A Termination Clause

A contract is not an infinite legal-binding document. If a party is consistently missing out on their responsibilities, you must have a termination clause, which will allow you to easily terminate the contract, if the need arises. 

Better yet, provide a mutual terminal mechanism, which terminates the contract when the goals of each party have been met through the life of the contract, or an agreement that allows a party to cancel an agreement if another party violates an important term in the contract.

It’s probably a good idea to include a notice segment, which will ensure that the party has a significant amount of time to respond or cover their bases.

Additional Clauses of Interest

If a dispute does arise, it might be beneficial to list down a provision, which requires the parties to ensure either arbitration or mediation and in some cases both. 

In legalese, mediation is a selective process, in which both parties try to work everything gout with the help of a neutral party. A settlement has to be approved by both parties.

Arbitration is a private process, in which an arbitrator hears out the arguments of both parties and makes a decision that both parties have to live up to. It’s similar to a trial, but it is cheaper and quicker than regular litigation.

Your Business Contract In the Works

Now that you know how to write a simple business contract, and make it legible to all – you can finally begin to actually create it. 

Best of luck with your venture. And if you’re interested in taking your enterprise to the next level, check out the comprehensive small business guides on the main page of our site.

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