How To Write a Contract Agreement

Contracts are an essential feature of any commercial endeavour that involves the exchange of money for products or services. As you can imagine, there are many types of contracts available depending on the nature of the agreement. However, there are a few essential things that all contracts have and you must include them when you are writing a contract.

  • Name of the parties involved in the transaction.  A contract is an agreement between two or more parties. The contract should identify all the parties concerned, be it an individual or a business entity, and make sure that their address and contact details are included in the contract.  For example, an employment contract will specify the name of the employee being hired and the name of the employer.
  • Definition and terms. Anyone who has signed a contract will tell you that it is very important to have terms used in the contract defined clearly. This is most important when the contract contains jargons or technical terms particular to the specific industry to which both parties belong to. Any definitions should be made at the beginning for the contract so as not to confuse both parties.
  • Length of the agreement. This is one of the more important features of a contract. Legally binding agreements should always state when the terms of the agreement will become effective and when it will terminate.  This actually benefits both parties because they have an opportunity to evaluate their business relationship at the end of the contract and decide whether they still want to pursue with their arrangement. It also gives both parties the chance to renegotiate the terms of the contract to reflect current industry conditions and trends. For example, a leasing contract will state when the lease begins and ends.
  • Financial terms of the contract. All commercial agreements require the exchange of money for goods and/or services. How much money is involved should be stated in the contract so both parties know what is due to them. For instance, an employment contract should clearly specify the salary of the employee and any bonuses and commissions he is expected to receive. It should enumerate employee benefits that he will receive during the duration of his employment such as paid leaves, health care benefits, allowances, additional compensation for excellent job performance, and other forms of compensation.
  • Cancellation of the contract. In a business transaction, it is inevitable that one party would find something that does meet their approval or expectations. When writing contract, the writer should state what conditions must occur before any party involved in the agreement can seek immediate termination of the contract  It must also clarify the steps needed to be undertaken to end the contract well ahead of its termination date.

When writing these are essential features of a contract agreement -- and writing the whole contract in general – one must use simple language and be clear in laying out the terms of the contract to avoid confusion among the parties involved.


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