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Contract templates: The basics
A contract is an agreement reached by two legal entities (two natural or legal persons with legal capacity), which is intended to have binding consequences.
A contract should include at least the following “4 must haves”:
- The purpose of the contract: Why do they enter into a business relationship
- The agreement: What is the subject matter of the business relationship
- The return: What is the remuneration for the object
- The agreement: Declaration of compliance with the agreed content
You should always secure yourself with a contract, no matter who you enter into a business relationship with and how good the relationship was before. In addition, your own business interests should always be kept in mind.
What aspects should a contract include?
Contractual terms
Previously made appointments that were not included in the written contract have also not become part of the contract in case of doubt. It should be carefully considered which information can be omitted; the contract would rather regulate too much and also unlikely scenarios than rely on being able to resolve this peacefully in the event of a dispute.
Payment details
Always provide the information regarding the agreed payment: When, how much, in what form (cash, bank transfer, check,...) must be paid. Once again, the motto is to be as precise as possible again.
Non-Disclosure Agreements
When entering into a business relationship through a contract, it is more than likely that the other party to the contract will gain insight into company practices and possibly trade secrets.
In order to prevent these from being carried out to the outside world during or after the contract period, a confidentiality obligation must be included in the contract as a clause. This declaration should also apply to all further future amendments and annexes.
Cancellation conditions
The terms of termination should always be explained, especially in the event of non-performance or poor performance by a contractual partner. This means that a party does not fulfill its part of the contract (its obligation) at all, i.e. in the case of a supply contract, for example, the agreed item simply does not deliver (non-performance), or, based on the same example, delivers the agreed items damaged and refuses to provide an undamaged item (poor performance). On the other side of the contract, the equivalent would be the refusal to pay or just a fraction of the payment.
It is important to cover these cases in the contract, as it is not possible to predict how a contractual partner or the relationship with him will develop. In this way, a more advantageous (than the legal) option of withdrawing from the contract can be incorporated.
The defined place of jurisdiction
In the event of a legal dispute, the agreed place of jurisdiction is sought first in the contract. This is simply an agreement on the applicable law. This is particularly relevant if the contractual partners are based in different countries.
Should this clause be forgotten, the dispute over the contract will most likely begin with a dispute over the applicable law. In order to save costs, effort and time, the place of jurisdiction should therefore be agreed in advance and must be written down in the contract.
Contract drafting: What must be considered?
Easy language
A contract does not have to contain any legal terms. It depends entirely on what kind of environment they want to do business in and whether they themselves have a few lawyers on their team who create the templates for them or whether their contractual partner makes use of a team of lawyers.
But not every business relationship has to resemble a legal black box: Only complex negotiations usually require more complex wording. Write your contract clauses for non-lawyers to speed up common understanding and enable faster contract conclusion.
In any case, simple and understandable language promotes an interdepartmental understanding of the contract, which can lead to stronger and better cooperation. It is important that the obligations and benefits of each party are explicitly stated and explained, as well as the consequences of a possible breach of these obligations.
Loyalty detail
You should always be as detailed and precise as possible when writing a contract, because later in the event of a court hearing, every word is taken apart and interpreted. That is why you have to carefully consider every word when creating it and check that it is understood exactly as it was meant when drafting the contract by an objective third party (in case of doubt, the judge).
Placeholders and neutral phrases
Include placeholders specifically where there will be something specific to the contract partner. Of course, care must also be taken to ensure that the template is largely formulated in such a way that it is neutral to the contractual partner and only allows the contractual partner to be clearly identified at certain points, which are then amended or completed in each case.
Format: Which software do I use to create my template?
Word
Most will have created their contract templates on Word first and that seems the easiest at first glance. Even though Word is perfectly suitable for creating a text document, storing countless contracts in different folders is often pure chaos.
In addition, each employee then only has their own templates on their computer and there is no central database that everyone can access. This inevitably means that all of their templates, even though they were originally uniform, are changed individually and unnoticed, meaning that there is no longer a consistent standard in the contracts.
Contracts are gladly created via Word, then converted into a PDF and sent to the contractual partner so that no unnoticed changes can be made. However, the PDF format for contracts has many disadvantages that you should be aware of before choosing it.
CLM Software
After all, you could also look for more complex software. Many providers of contract lifecycle software With the purchase of the software, experts already offer ready-made templates, which can be adopted or adapted to individual needs.
