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1. Business Law
Chapter 12:
Drafting Contracts

2. Legal Professionals and
Contracts
• Law firms are often called upon to either
assist in the creation of a contract or to
actually draft a contract as a whole.

3. Why Business People Want to
Avoid Litigation
• Litigation is a long, drawn-out, and
costly procedure. Cases may take years
to successfully litigate

4. Avoiding “Legalese” in
Contracts
• One of the biggest temptations for a
legal professional when preparing a
contract is to use legal-sounding jargon
and other impressive words to
emphasize the seriousness of the
document.

5. Contract Law Resources
• There are numerous resources for
contract law.
• Some are better than others.

6. Formbooks
• A contract formbook contains a wide
variety of contracts, clauses, and other
materials that act as a guideline for a
person creating a new contract.

7. • Laypersons often make the mistake of
assuming that a form from such a book
is the only thing that they need to
address all of their legal concerns.

8. Treatises
• Written by eminent legal scholars, a
treatise focuses on a narrow area of the
law and explores it in detail.

9. Casebooks
• Casebooks contain interesting and
seminal cases on particular topics of
law.

10. Statutes
• Some contracts have specific
requirements set out in statutes.
• If you fail to meet these legal
prerequisites, the contract may be void.

11. Appellate Decisions
• Appellate cases interpret and expand
on statutory laws.

12. Internet Sites
• Pay sites, such as Westlaw or Lexis-
Nexis, provide a wealth of the
information that would be almost
impossible to duplicate in print form.

13. General Books on Contracts
• For a legal professional, these books
are essentially useless.

14. Drafting Contract Clauses
• Drafting contracts requires attention to
detail and conformity with the law.

15. Checking for the Contract
Basics
• All contracts must meet the basic
elements set out in the previous
chapters of your text.

16. Offer and Acceptance
• Contracts usually do not detail the
history of the negotiations between the
parties.
• It is always a good idea to gather
evidence about negotiations, especially
the offer-acceptance period because it
may become an issue later.

17. Mutual Assent
• Mutual assent is a contract detail that
not only can be gathered from the
contract, but also should be presented
clearly and unambiguously.

18. Capacity
• Other sources must be used to
determine capacity.
• This may require some research into
the parties’ backgrounds as well as
additional information about the
negotiations themselves.

19. Legal Subject of Contract
• The contract should be checked to
make sure that it contemplates actions
that are legal in the jurisdiction where it
will be performed.

20. Drafting an Offer
• An offer must contain specific language
and show an evidence to enter into a
contract.

21. Drafting an acceptance
• An acceptance is valid if it unequivocally
accepts the offer as stated, without
changing any of the essential terms.

22. Recitals of consideration
• Consideration is the legal detriment
assumed by both parties to the
transaction.
• A simple phrase such as “in
consideration of…” is often sufficient.

23. Specific Contract Clauses
• There are concerns for specific types of
contract clauses.

24. Goods and services
• Contracts involving the sale of goods
are a common form of contract.
• The transaction may also fall under the
UCC.

25. Statute of Frauds
• When a contract falls under the
jurisdiction of the state Statute of
Frauds, the statute must be followed
closely.

26. “Time is of the essence”
• A contract clause that states that time is
of the essence means that performance
must occur by a specific date or the
contract will be voided.

27. “Trade or business secrets”
• If the client wishes to insert a provision
preventing an employee from releasing
sensitive information about trade or
business secrets, the contract must
contain some provision that specifically
states what types of information should
not be released.

28. “Noncompete”
• Noncompetition clauses in contracts are
usually reserved for employment
contracts.
• Courts will generally not enforce such
provisions when they are overly broad.

29. Contract of “Adhesion”
• The small print found on the reverse of
airline tickets or other types of forms is
just as binding as the large print on the
obverse.
• Such contracts have often been found
to be invalid.

30. The Fine Print
• The fine print is the contract.
• As a general rule, a party is presumed
to have read the entire contents of any
contract that he or she has signed.

31. Conditions
• Is the language used in the clause open
to interpretation as a condition?
• If so, what type of condition is it?

32. Payment
• Payment is one of the most important
contract clauses for the parties, even
though it may have no greater
significance to the contract drafter than
any other contract provision.

33. Damages
• Damages can come in many forms,
from consequential to punitive.
• Although most contracts are silent about
the topic of damages, it would be
prudent to include some provision about
damages in a contract.

34. Time
• What is the effective date of the
contract?
• When is performance to be carried out?

35. Choice of Law
• A choice of law provision is simply a
contract clause that states which
jurisdiction will have the power to hear
and decide any litigated issues under
the contract.

36. Parol Evidence Rule
• The parol evidence rule is an
evidentiary rule that states that when a
contract is written it is the sole and
exclusive evidence of the contractual
obligations between the parties and a
court will refuse to hear any oral
testimony that attempts to modify those
contract provisions.

37. Death of The Parties
• In most situations, when an individual
dies his contractual obligations die with
him.

38. Bankruptcy
• Bankruptcy is an action filed in federal
court to discharge an individual or a
business liability.
• These liabilities can include contractual
obligations.

39. Attorneys' Fees
• The “attorneys’ fees" provision in the
contract is a simple statement that
provides for the payment of an attorney
for any expenses related to litigating
issues under the contract.

40. Alternative Dispute Resolution
• An arbitrator is a person who is
appointed either by the courts or
selected by the parties who will attempt
to resolve the differences between the
parties.

41. Notice
• The party should be given sufficient
time to receive notice and to take action
based on it.
• However, the notice period cannot be so
long as to make it impractical to give it
in the first place.

42. Termination
• Contracts can terminate by the
agreement of the parties or by some
other factor.
• When the parties wish to terminate by
agreement, is there a contract clause
that provides a mechanism for doing
so?

43. Modification
• The manner of modification should be
expressed in the contract so that all the
parties know how it can be done.

44. Signature Provisions
• When the parties sign the contract they
are expressing their intent to be bound
by the entire terms.
• The signature provision should be
clearly set out so that each party knows
exactly where to sign.

45. Exhibits and Attachments
• Contracts often contain exhibits and
attachments to which the contract
refers.
• A contract might contain a ‘deal memo’
or a memorandum of contract.

46. Contracts Under Seal
• In most jurisdictions, the old common
law form of “contract under seal” has
been abolished.

47. Double-checking the Contract
• The final contract should be reviewed
very closely.
• Each contract clause and provision
should be examined to make sure not
only that it is the actual agreement
between the parties but also that it does
not contain any grammatical or spelling
errors.