How to Write a Contract

Whether one needs a contract for consulting services, software development or a Bitcoin transaction, the basics of contract drafting are the same.

The writing of a legal contract is an acquired skill.

Although many contract forms (templates) are published on the web or in books, the words in forms often do not reflect the skill that is needed to write a workable contract.

Contract Forms Can Be Either a Virtue or a Vice

A published contract form can help remind a skilled lawyer what issues need to be covered in this type of contract or that. But very commonly an effective contract requires more than covering issues.  An effective contract requires careful articulation of principles in a way that is unique to the needs of the client or clients.

Very commonly, what a business person thinks she wants in a contract is different from what she really needs.  Many business people have only limited experience observing the world of legal agreements; they don’t realize how fluid and flexible contract law can be.  They rigidly think they need a document similar to something they’ve seen before, but they actually need something different, something custom to their specific transaction.

Electronic Communication Fuels New Business Relationships

The modes for writing, amending and performing commercial contracts have changed markedly since the 1980s.  Now with email, text messages, web pages and the like, ongoing contractual relationships can be managed with communications, language and negotiations that are quite different from what was possible with traditional paper-and-ink contracts.

Electronic messages can – when appropriate – enable a more fluid contractual relationship, which evolves with time and changing circumstances.

Avoid Unnecessary Words

Sometimes Rigid Formality Is Best

When I was a young lawyer working for a large law firm, I was taught to write contracts in a rather formal, stilted style.  That style is not always wrong.  But over the years I have learned there can be different drafting styles, suitable for different settings and personalities.

Some clients need careful, scholarly draftsmanship that makes sure a contract can be enforced against an adversary in court.  (When I say "scholarly" I mean the contract words need to be backed up with specialized legal knowledge that comes from research or experience -- such as knowledge of the local law on the enforcement of a non-compete clause against a former employee.)

But other clients do not need that.  They need something else instead.  They need a contract that emphasizes mutual cooperation and trust.  They need a roadmap for collaboration . . . not a weapon to be deployed in the courtroom.

A Story about Honor and Trust

For example, I once helped write a contact where one party was cooperative, but refused to take any legal liability whatsoever.  After discussion, the party on the other side realized that trust and cooperation were the essence of the deal.  He realized he had no interest in ever enforcing legal liability against the first party.  Therefore, we were able to write a contract that committed the first party only as a matter of honor and reputation but not as a matter of legal liability or obligation.

In the same vein, a new kind of contract, know as a vested agreement, stresses joint pursuit of objectives rather than antagonistic give-and-take (I win; you lose).

Succinct Writing Promotes Comprehension

Many contracts are too long and wordy.  The reason is that the contract drafter did not take the time to distill the key ideas into direct, simple words.  As a consequence, the parties can be dissuaded from reading and understanding their own contract before they sign it.

Further, the parties can be confused about what they have actually agreed, and a dispute can lead to protracted litigation or arbitration.  The court or arbitrator cannot discern unambiguously what the contract means.  The judge, the jury or the arbitrator must guess as to the original intent of the parties.

I was an English major in college.  The book The Elements of Style by Struck & White taught to write tight.

Skepticism Avoids Ambiguity

An experienced writer of contracts learns to look at sentences skeptically.  For example, the experienced writer would look askance at the sentence: There will be a payment of $500 on December 26, 2013.

That sentence may be accurate, but it might be open to ambiguity or misinterpretation.  The sentence does not say who will make the payment or who will receive the payment.

Now, the person who wrote the sentence might believe it is implied from the context of the contract who will pay and who will receive.  But sometimes to rely on implications can invite too much risk of dispute.

Commonly a meticulous, experienced writer of contracts will prefer to replace the sentence above with something like:  Taylor will pay Courtney $500 on December 26, 2013.

However, effective elimination of ambiguity is a skill that involves learned judgment.  Sometimes, on some issues, ambiguity is needed to help move a testy relationship forward.

Alternatively, sometimes on some issues, the ambiguity is so insignificant that it is better to make a brief, arguably ambiguous statement than it is to compose a longer statement, which makes the contract longer-winded. 

What is your opinion or experience?

–Benjamin Wright

Attorney Wright is author of The Law of Electronic Commerce.

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