How to create good contracts

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1. Get it in writing.

Although verbal agreements are legal and binding in many situations, they are often difficult to enforce in court (and in some situations, unenforceable). In the business world, most agreements must be in writing, even if the law does not require it. A written agreement is less risky than an oral agreement because it has a document that clearly details the rights and obligations of each party in the event of confusion or disagreement.

2. Keep it simple.

Contrary to what most lawyers think, it does not take much "so far" and "part one" legal jargon to make a contract enforceable. Instead, create short, clear sentences with simple, numbered paragraph headings that alert the reader to what is in the paragraph and make good model contracts (in spanish: modelos de contratos).

3. Deal with the right person.

Don't waste time negotiating a business agreement with a minor person who has to approve everything with the boss. If you feel this is happening, politely but firmly request that you contact the person in charge. Make sure the person you are negotiating with has the authority to bind the company and has a vested interest in making sure the company fulfills its obligations under the agreement. If you are not sure who it is, ask. In a smaller business, it could be one of the owners; in a larger organization, it could be an executive director or an operations manager.

4. Identify each party correctly.

You would be surprised how often business owners make mistakes and how important they are. You should include the correct legal names of the parties to the contract so that it is clear who is responsible for fulfilling the obligations of the agreement (and against whom you have legal rights if things go wrong). For example, if a business is organized as an LLC or a corporation, identify it by its correct legal name, including the suffix Inc. or LLC, not by the names of the people who sign the agreement for the business.

5. Explain all details.

The body of the agreement should detail the rights and obligations of each party. Don't leave anything out; if you discuss something verbally and shake it up but it's not in the contract, it will be nearly impossible to enforce. In the world of contract law, judges (with some exceptions) can only interpret a contract from its "four corners," not from what the parties said to each other. If you forget to include something, you can always create a brief written amendment. Or, if you have not signed the agreement, you can handwrite the change in the contract. If the parties sign the change, it becomes part of the contract.

6. Specify payment obligations.

Specify who pays whom, and especially in home leases (in spanish: contratos de arrendamiento de vivienda) when payments are due and the conditions for making payments. As you can imagine, money is often a controversial issue, so this part should be very detailed. If you are going to pay in installments or only when the job is completed to your satisfaction, say so and list the dates, times and requirements. Consider including the method of payment as well. While some people may agree to a business check or a business credit card, others may want a cashier's check or even cash.

7. Agree on the circumstances that end the contract.

It makes sense to establish the circumstances under which the parties can terminate the contract. For example, if one party fails to meet too many important deadlines, the other party should have the right to terminate the contract without being legally bound by the breach (violation) of the agreement.

8. Agree on a way to resolve disputes.

Write in your agreement what you and the other party will do if something goes wrong. You may decide that you will handle your dispute through arbitration or mediation instead of going to court, which takes a lot of time and money.

9. Choose a state law that governs the contract.

If you and the other party are in different states, you should choose only one of your state's laws to apply to the contract and avoid complicated legal disputes later. In addition, you may want to specify where you will mediate, arbitrate, or take legal action under the contract. This will simplify your life if a dispute arises.


10. Keep it confidential.

Often, when one company hires another to perform a service, the other company will have access to confidential business information. Your agreement should contain mutual promises that each party will maintain strict confidentiality of any business information it obtains during the performance of the contract.

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