Tips for Making a Sound Business Contract

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Tips for Making a Sound Business Contract

Business contracts are an essential part of any business transaction. Without contracts, it becomes difficult to enforce any business transactions. The point of any transaction is to lay out the broader berth of activities that would be implemented as part of the business transaction. So, when drawing up any business contract agreement, some tips you need to follow are

Outline the Scope of Work Clearly

The most crucial part of any contract is the scope of work. This clause outlines what the agreement is about, and it describes the nature of work expected from all the parties involved. When drafting the term, some things that must be included are

The definitions of all the terms that will be used in the contract

This clause is essential if the parties decide on some meaning of the term that is particular to the trade, industry, or business. This is important, especially if the same word carried multiple meanings across different sectors. Parties to the contract can use this to their advantage when there are disputes between them and get their way. All the definitions that would be used during the contractual period and in the business that the parties are in at the time of drafting the contract. 

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Purpose of Drafting the Contract

When you enter into a contract, the point of the agreement must be mentioned clearly. After you specify the purpose, you can outline all the terms included as part of the contract and then go on to define them. Even if you want to elaborate on the purpose of the agreement, it helps if you did that early on or gave a summary. You can always elaborate on the mission once you have described all the terms that are included in the contact. Either way, the purpose of the contract is what ties the agreement together. That’s why you need to elaborate as much as possible on the purpose for which you entered into the contract.

Parties to the Contract

When drafting a contract, assigning clear accountability and responsibility is vital to hold them liable in any courts of law. Even otherwise, to enforce performance, you need the details of all the parties that are privy to the contract. When we mention the details of parties, we mean

  • Legal names of the parties. In the case of a company, the company’s official name is as available with the registrar of companies
  • The permanent address of the parties. In case of a company or any other form of business, it is the address of the headquarters at or the address of the subsidiary company with which either party is doing business with through the contract
  • The parent company or business with which one party is doing business
  • Contact details including PO box number or any other means of communication

Also Read:

What is a Business Contract

Who Takes the Business Partnership Agreement

Terms of the contract

The terms of the contract must be as comprehensive as possible to ensure that the performance can be enforced during the business contract agreement. Some of those terms include

  • Date from which the contract would be enforceable
  • The duration of the contract
  • The exact details of when an agreement would be terminated
  • The specific nature of the services provided
  • The compensation or the quid pro quo that one party offers to the other for the services
  • The date and duration of provision of such services
  • Who the parties to the contract are, and who the beneficiaries will be, if different from the contracting parties
  • Any specifications by which the parties are expected to provide the services including 
  • What constitutes a breach of contract
  • The remedies available for a breach of contract
  • The recourse that each party can use in case of a breach of contract
  • What events represent a mutual termination of the contract
  • A force majeure clause outlining the events that will trigger a force majeure
  • The actions that the parties must take in case the force majeure clauses triggers
  • Any details of any warranties or representations from both the parties
  • Other miscellaneous clauses as the business demands
  • Details of any arbitration
  • Whether the scope of work can be changed later
  • The process for changing any detail or aspect of the contract
  • Jurisdiction of the contract

Taking Help and What to do In Case of a Breach

It is always advisable to take the help of a counselor when drafting any contract so that you don’t have to worry about the legality of the agreements. Every contract has a fixed time, and sometimes the breaches can occur even before the contract ends. In that case, the parties must lay out a clear process for treating that breach of contract. Some items to consider are the notices that would be given and the other ways that the breach would be treated. The parties may decide whether to give extensions in case of breaches and whether the contract ends at termination. In some cases, there will be many rider contracts that define the scope of services or details about any other element of the contract. Parties must decide how to treat those riders during the tenure of the contract.


It can be really tiring trying to draft the perfect agreement. If you’re not experienced at the legal elements of the business, it can become difficult to draft agreements that the other party would stick to perform their share of obligations.