Top tips for drafting good business contracts

It goes without saying that a good contract is important given it is a legally binding document. Writing a business contract which accurately reflects the intentions of each party is critical to its success.

So without trying to do ourselves out of a job, we have put together a fact sheet with our top tips to help you with business contracts. Here’s a brief summary:

• Each party may want to contract on the basis of their own terms and the battle is often won by the last one to put forward terms and conditions that were not explicitly rejected by the other. Therefore, if you want to contract on the basis of your own terms and conditions you must clearly state this.
• The use of defined terms in a contract can save time and create consistency and certainty, but you should only use one if the term is to have a specific meaning in every instance where it is used.
• On signing a contract, you should comply with its terms and not try to vary it either orally or by conduct.
• If you are including restrictive covenants and non-compete clauses, you should ensure that the drafting is not too broad or onerous as this could render them unenforceable.
• If you are providing the other party with confidential or sensitive information about your business which you do not want disclosed to others, you should include a confidentiality clause.
• If you include a clause which stipulates that a sum of money is payable on a breach of contract, you should ensure that this does not amount to a ‘penalty clause’ which would be unenforceable.
• If any new intellectual property will be created under the contract, you should stipulate who will own this and include any relevant assignment and licensing provisions.

Whilst it is useful to understand the pitfalls of commercial contract drafting, it is always advisable to get legal help, particularly if the contract contains technical or complex provisions or if it is intended to be used for a long time.