Common Contract Drafting Mistakes

There are numerous ways to make mistakes when negotiating and drafting a contract. Here are the top mistakes that small businesses make and that you should avoid. If you feel insecure heading into the

Not Drafting the First Draft

You always want to volunteer to draft the first draft of a contract. Doing so can give you a tremendous advantage in the negotiations. This allows you to structure the deal initially on your own wish list with terms most beneficial to you.

Moreover, from a legal cost perspective, drafting the first draft often is more cost-effective than responding to the other lawyer's one-sided draft. For drafting tips, see What You Want from a Contract.

Not Including Explicit Payment Terms

Almost everyone understands that payment terms are an essential part of an agreement and should not be omitted or left to be decided until after the agreement is signed.

Good drafting requires that the payment terms be clearly laid out in the agreement. Avoid ambiguity as to what the amount owed will be, or provide a clear formula for determining the amount owed. Put terms that explicitly state how much is owed and when, as well as the form of payment, and also throw in what will happen if the other party doesn't pay or pays late. Make sure to allocate who pays any taxes involved.