How to write a contract agreement.

1. Sales contracts.

Every sale can be seen as a contract between the buyer and seller. The buyer promises to pay for a property or service (such as intellectual property like music or images), and the seller promises to transfer ownership of that property, provide the purchased goods, or perform the purchased service. Examples of sales contracts include a promissory note, a bill of sale, a warranty or security agreement, and a purchase order.

2. Employment contracts.

Employment contracts relate to the terms of employment, including services for hire from freelancers, consultants, small businesses, or other independent contractors. These types of contracts may also contain termination agreements in case the worker’s employment is terminated, as well as nondisclosure agreements (NDAs) and confidentiality clauses, which protect confidential information.

3. General business agreements.

These types of agreements can cover all different aspects of doing business, such as partnership agreements and formation, business owners, capital investment, and the sale or purchase of stock. NDAs, indemnity agreements, or waivers of rights are also usually considered business agreements.

4. Settlement agreements.

Parties to a dispute might agree to a settlement to avoid going to court. The terms are often set out in a settlement agreement signed by the parties.

1. Determine the type of contract required.

Start with your legal needs and the relationships you need to define formally. Consider the different types of contracts and choose the one that is the closest fit for your situation. For example, an employment contract will require different terms than a sales contract. Also, consider discussing the contract needs with others in your department or on your legal team.

2. Confirm the necessary parties.

With the right contract type in mind, now you can iron out who should be part of it. Include people from your organization with a vested interest in the contract’s terms and structure, from project managers to human resources. Be sure to involve anyone who is required to review the contract for approval or provide signatures at later stages.

You’ll also want to put together a list of all the individuals from external sources, such as candidates, suppliers, or vendors, who need to be included in the final document. Make sure to gather all of their contact information.

4. Write the contract with the proper formatting.

Whether you use an existing template or start from scratch, the contract should be appropriately formatted and written in a professional manner. When writing a contract, you should include an introductory section that lists and defines all of the interested parties. A well-constructed contract will cover its duration and the specifics regarding the terms of the agreement between the parties.

The tone of a contract should be formal and concise. All relevant terms should be highlighted and defined, especially anything proprietary or technical, to ensure all parties understand the terms and inclusions. Use concrete words rather than industry jargon to keep the intent clear.

A properly formatted contract will typically have copy that is left-aligned and single-spaced. If the contract is long or has multiple sections, a table of contents should be included to make it easier to review. Use shorter paragraphs to group similar concepts together and break up the document accordingly with headings and subheadings to enhance readability.

Contracts are legally binding documents that also require signatures. Allocate ample space to collect the signatures of all the parties involved. To do this, type each individual’s name, title, and company affiliation and leave room for them to sign either physically or electronically via e-signature.

5. Review the written contract with a lawyer.

Even if you’re using a template provided by a legal team, you’ll want to pass your contract to a lawyer for review before issuing it for signature. Suppose you have concerns about whether the contract covers the terms you aimed to set. In that case, you can ask the lawyer to specifically look for or provide language to substantiate your position. The lawyer should serve as an advocate for the company’s and your best interest, and a legal review can help ensure that what you are agreeing to is what you intended.

6. Send the contract agreement for review or revisions.

Before sending the contract out for external approval and signature, you’ll also want to make sure that all internal stakeholders have a chance to review its content. While the contract may be legally solid, other team members may notice exclusions or required changes regarding the specifics related to their area of expertise. Instead of directly editing the document, capture any feedback via redlines that you can review, and if necessary, pass it back to your legal team for further assessment before finalizing the document.

Get legal advice.

Contract law is complicated and full of nuance and, sometimes, legalese. Before you create, finalize, or sign a contract, especially if you learned how to write a contract yourself, speak to an attorney for advice.

Be prepared to haggle.

Negotiation is a natural part of any business relationship. Prepare to negotiate the terms of your contract. Know where you have room to give and where you have to stand firm.