Contract Drafting and Negotiating Tips

Here are tips for helping you finalize a great contract to your benefit.

Establish Your Objectives Strategy

Take the time to map out what you want out of the contract and how you intend to achieve that end. Also, consider what you are and are not willing to

Take charge of the draft

You always want to write the first draft yourself. Doing so can give you a tremendous advantage in shaping the negotiations. Writing the first draft allows you to:

• Define the issues to be addressed in the contract
• Set the tone of the business negotiations with the language of your choice
• Potentially limit the issues raised by the other party, since she may respond to the points raised in your draft before raising deal points of her own
• Structure the deal based on your own wish list, with payment and delivery terms most beneficial to you
• Avoid the hassle of renegotiating the other party's draft, which may be more time consuming than preparing your own first draft

Preparing the first draft of a contract can be a ton of work, but it is worth the effort.

Look at sample contracts and forms

The best way to start drafting a contract is to look at several sample forms that may be similar to your situation. If the sample forms are any good, they will alert you to issues that you may not have even thought about, and they can provide you with the necessary and appropriate language for your contract. Take a look for forms on the Web or in forms books.

Don't be too reliant on a "standard" form or sample contract

On the other hand, don't make the mistake of being too reliant on someone else's form. Often, the form may not be applicable to your situation, may be drafted for the benefit of the wrong side, or may be just plain lousy. Most forms are simply a starting place and need to be revised to reflect your particular transaction.

Make Your Own Standard Form

If you plan to enter into the same type of contract over and over, then take the time to make your own standard form for that type of contract. This way you can present the other party with your ideal contract terms, and then negotiate from this strong position.

If you are just getting started it can be tough to get a sense of what you should put in your standard form. The other party definitely isn't going to tell you what you should be asking for, and your competitors won't be falling all over themselves to help you either. Call professional associations and friends in your business for sample contracts written from your perspective — not the other side's.

When you are starting out, it may be worthwhile to pay a lawyer to draft an initial standard form contract for you. A business attorney usually reviews many more contracts than his or her clients and may have a good sense of the latest developments in your area of business. But be sure to use a lawyer with direct experience in your field, on your side of the competitive fence.

Here are some tips for drafting your own standard form:

• Don't use the other party's contract terms as a model for your standard form. I guarantee you they haven't been up nights writing contracts with your best interests at heart.
  
• Don't be afraid to ask for too much in the standard form, within reason. You can always revise aggressive contract terms at the request of the other side.
  
• On the other hand, do stay within the boundaries of commercially reasonable behavior. Aggressive doesn't mean offensive. If thirty-day payment terms are the standard in your field, sending out a standard form with three-day payment terms will only create ill will and slow negotiations. And you'll feel silly when you have to admit that your "standard form" isn't the standard at all.
  
• Make your standard form look as official as possible, by formatting it with a professional looking word processing font.

Put your wish list of commercially reasonable terms in your standard form, and let the other party tell you what it is not willing to do.

Be aware of legal requirements

Certain types of provisions in a contract may be questionable legally, such as non-competition clauses in certain instances. Some provisions, such as limitations of liability or waivers of warranties, may need to be boldfaced or in all capital letters to be effective. A good business lawyer can point these out to you.

Use exhibits

Sometimes your best bet is to use exhibits (also called attachments or addendums) to a contract. That way, you can use your base contract over and over, and all the details that are specific to the transaction, such as a description of goods to be sold, or the method of payment, can be put in an exhibit. Just make sure to number or letter each exhibit, and be sure to refer to each exhibit in the main contract. You don't have to sign the exhibits, just the main contract.

You will also want to read Nine Tips to Create Better Contracts and also Common Contract Drafting Mistakes.