How to Write a Contract
I was reviewing a contract for a client and under a section called "purpose", I kid you not, it said "To better the world though communication." As much as this is a laudable goal, and a much as the parties may have believed in the goal, it's not really part of the meat of the contract. But what is?
Many clients try to save money by drafting contracts themselves. Many attorneys try to avoid any liability, not just for their clients, but for themselves but over drafting contracts. And many law students get hives while studying contracts. But let's back up and look at what a contract is. A contract is nothing more than a story. It tells a mythical person (sometimes called a judge) who might find this story months, if not years after it was written, what the participants in the story expected would happen before the story even began to unfold.
And just like we were taught in English class in high school, there are parts to a story. You need to make sure the characters are introduced. Is this story about ABC Corp, or about ABC Corp's owner? And if there's a character in the story who's not part of the agreement, like ABC Corp's customer, introduce them, let the reader know what the customer's position is.
Then there's the action scene. Who is going to do something? Well both of the main characters are. The first character is going to do something (provide a service) or provide something (sell a product). Then the second character is going to do something in response (Drum roll please) -- pay money for the service or product. You should be able to follow the money through all of the ifs, ands and buts of the story.
Flesh out the story so it's very clear. Not Character Two will pay $XXX. But Character Two will pay $XXX 5 days after Character One delivers something.
Then you look at what might go wrong -- might a wolf (or a shark) come along and blow the house down? What if the first character messes up. What if the services aren't right. But who decides if the services aren't right? And when? And what if the customer (remember that minor character who isn't really a part of the contract?) isn't happy?
I'm not advocating DYI contracts. There are legal gottchas that can render a contract useless, which really do take law school and often years of experience to spot. But the reality is that many owners of small businesses do do their own contracts, and more often then not, you can't tell from reading them, what the parties expected would happen, even if nothing went wrong. And of course, the real purpose for a contract is to express your expectations if things DO go wrong.
So the first step in looking at a contract is to see if it tells a clear story. It's not a bad idea to go back every year or so and look at any contracts you use more than once. Has your business changed how it does things? Is the contract still telling an accurate story? Or maybe there was just a mistake that no one noticed the first time around. That happens all the time, even after teams of attorneys have drafted a contract. A good contract is a tool. It's always best to use the best tools.
