02/ 06/ 2006
by Jeffrey Moses
Contract disputes usually happen when the final contract varies from what one or both parties intended. Even when both parties enter into an agreement with the best intentions, the final contract may not accurately or completely represent what they discussed and agreed upon before they wrote the contract.
Therefore, you should think of a contract as a process, beginning not when the actual writing of the contract starts, but when discussions or negotiations begin. Take the following steps to draft contracts effectively with minimum friction between parties.
You should never assume that what you discussed or agreed upon will end up in the written contract. For this reason, you should take notes during all discussions before the contract writing begins. When verbal agreements are reached (prior to the written contract), all parties should initial the notes, showing agreement to and awareness of various terms, financial arrangements, time frames, stages of completion of a project, etc.
Make sure that everything agreed upon ends up in the written contract. If not, proving inclusion of something can be extremely difficult.
A contract that is fair for all parties does not need to include obtuse or lengthy legalese. You should insist on clear, simple wording in every clause of the contract. This is the best way to avoid unclear, vague or even misrepresented definitions that can later cause dispute. Whenever one or both parties find a portion of a contract unclear (i.e., may not state what was initially agreed upon), they should change the wording or consult attorneys to determine whether it could lead to future disagreements.
In service and financial contracts, every word makes a difference. Simple mistakes, such as basing payments on net rather than gross profit (or vice versa), can be costly. Review contracts carefully and compare them with notes taken during the discussion and initialed by those involved.
During lengthy negotiations, financial terms, amounts and definitions can change many times. Since these usually comprise the key elements of a contract, all parties should check and double-check these items before signing the contract.
Always discuss and include ways one or both parties can terminate the contract, and specify how disagreements will be resolved (arbitration, mediation, lawsuit, etc.).
You can find extensive contract checklists online, in business and legal books and through attorneys. Review several of these checklists during the discussion period to make sure that your needs are addressed. Consult with an attorney familiar with your industry throughout the initial discussion period and before signing a contract.
