Writing a Contract Agreement

2010 | Jul 14 in Business Development , Home Page News , Leadership

By E-Myth Business Coach,

One of the critical instruments in any transaction, whether between a vendor and a customer, an employer and employee or even two private parties, is the basic contract agreement. For some business owners however, the basic contract agreement isn’t so basic.

Some feel that using a contract is an unnecessary inconvenience. Some feel it could actually cause them to lose an account or agreement. Others fear committing themselves to a poorly written contract or one that is not legally accurate.

When you get down to the heart of it, a contract is simply “an agreement or understanding between two or more entities to perform services.” It provides, above all else, communication and clarity of accountabilities for the parties involved. It establishes a basis for trusting that each will carry out the terms of the agreement.

Until fairly recently it has been the domain of attorneys and legal departments to draft and write up contracts. However, with the advent of authoring software and legal forms websites, this task has been made simpler, less expensive and more readily available to the small business owner. Here are some pointers to help you write a clear, carefully-worded contract if you choose to create your own.

First: Be Clear About What You Want To Accomplish

One of the fundamental keys to a solid contract agreement is to be certain of what you want to achieve and what each party is obligated to do. The danger with boilerplate contract templates and authoring software, however, is that a business owner may be tempted to make do with anything that “looks right.” Unless you can have that template or standard contract form reviewed by an attorney it is usually not a safe bet. Which leads us to another question: Do you always have to have an attorney involved?

The reason you create a contract agreement is to produce something that will clarify and  communicate terms and accountabilites in a given transaction. You will often get better results with some degree of legal review than you can obtain without it. What are those results? Review of the use of certain terms, potential liabilities, and the elimination of clauses that might violate standing law. Does this mean that you have to employ your attorney to draft every contract agreement from scratch? No. And you probably can’t afford the time and expense associated with that anyway. However, having an attorney look over the contents of any contract is always a wise move. And it may be that your attorney already has a template for the type of contract you need.

Out of the Box Options

In addition to basic legal templates available with many word processing programs, and legal authoring software, many online contract services are available. These services typically use what is known as rule-based document assembly systems. This simply means the service utilizes a database of alternative clauses that are assembled based on the input from the user and the built-in logic function of the program. Other online alternatives include a wide variety of legal document services that vary in cost and quality. The key here is to be discerning and cautious. Reading reviews of these sites and services, as well as seeking advice from trusted colleagues, is always a good idea before committing yourself to using a generic contract agreement form.

How To Write Your Own: 5 Basic Steps

Depending on the complexity and extent of your contract agreement needs, it is certainly possible to draft your own. Although there are many types of contract agreements, there are essential steps that can be summed in these five components:

  1. Be sure to have complete and accurate information for the people or business that will be in the contract. This includes all legal addresses, names, and tax identification numbers.
  2. Begin the contract by stating all parties involved and all the pertinent business information you have available. This should include any business names and addresses.
  3. Write the terms of the contract. This is considered the body of the contract. (For many business contract agreements, this can be quite extensive, which is why legal-sized paper is often preferred!) This will include how long the agreement will last, terms and conditions that will apply, and exactly what goods or services and payment will be required from each party. The actual length and detail will be determined by the type of business and the agreement you need.
  4. Include a signature and date line at the end of the contract. There should be a place for each person to sign plus a witness and/or notary to sign.
  5. If possible, it is always a good idea to have the contract signed or executed in front of a notary or attorney.

Everybody Wins With A Well-Written Contract

The ultimate goal of a contract agreement is to communicate with clarity the  intent and accountabilites for all parties involved. Having a well-written contract does not negate the importance and power of a verbal agreement and a handshake. On the contrary, a written contract serves to permanently and clearly articulate that spoken promise. A proper and effective contract agreement is key to sealing a deal successfully.

As with any business leadership skill, developing contract agreements is learned in the doing. Knowing the fundamentals before committing to any contract form is essential for achieving your objectives while preserving relationships with customers or clients, vendors or employees.


  1. .KATE L. says:

    Thanks for the 5 basic steps, it has broaden my mind . Now i know  i have to let all involved have to sign before a witness. Thank you.Kate L.

    Submitted Jul 14, 2010 3:02 PM

  2. .Stephen H. says:

    Great article. To be honest, I'm probably convinced of drafting a contact then getting a lawyer to check it out before proceeding.

    Submitted Jul 14, 2010 9:40 PM

  3. .Gladys H. says:

    Great information. Keep up the good work.

    Submitted Jul 15, 2010 7:36 AM

  4. .Mark P. says:

    I just came on this site and I am happy to say that this is very good for me. I will surely suggest to my friends to visit this site. I appreciate this. Thanks a lot.



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  5. .ogola s. says:

    Contract agreements are an headache as your not sure if every angle has ben covered.Thanks for the useful tips .


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