In one way or another, all businesses will have experienced initiating a contract. A contract is legally binding and creates a mutual agreement between all parties. They are used for vendors, clients, partners, and employees. That is why when drafting a contract, it’s important that all clauses are clear and all agreements are stated to avoid confusion.
Technology has made everything easier with automated contract drafting. So, there is no excuse to produce contracts without errors or scattered ideas. A contract drafting software can help build better relationships with third parties and ensure smooth transactions during the contract period.
But, just like everything else, mistakes can happen. Human errors are inevitable. However, with the right knowledge and steps, you can create well-defined contracts that make everyone happy.
The Process of Contract Drafting
Drafting a contract doesn’t have to be hard. There are simple ways to approach contract drafting. The first and most crucial step is to collect all the information you need from both signing parties. For example, everyone’s full name, job titles, company names, and addresses.
You would then need to include the expectations, whether it is a product or service you offer or what roles and responsibilities you wish to see. Followed by specifying the duration of the contract, which is crucial to create a clear understanding of the contract period. Then you need to state what happens if the contract is not followed to avoid legal risks. Finally, you need to add a place for the signature. A contract might not be valid without this and can cause many issues down the line.
Now that you know how to draft a contract. You should be aware of what happens if you make these common mistakes.
1. Forgetting Common Grounds
All the details in the contract should be fair. It should cater to everyone’s needs. For example, the number of hours someone must work, the outputs they must submit, the number of products their truck should carry, bear in mind the size of their trucks, how much workforce they have, and anything else that meets everyone’s needs and requirements. Forgetting common grounds can prolong the contract drafting process because you may have to go back and forth in editing and reviewing the document.
2. Not Proofreading
Now, we all know what happens when you misplace a comma or spell words wrong. So, you’ve got to ensure that everything is accurate, with no spelling mistakes, correct punctuation, correct use of words, and so on. Proofreading will keep your contract precise and accurate, which is, of course, your main goal when contract drafting.
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3. Duties and Responsibilities Are Not Clear
You wouldn’t want to enter into an agreement with someone who doesn’t have an idea of what they need to deliver. You wouldn’t have third parties doing things freely because this can lead to delays and loss of revenue. All parties involved in the contract should have a clear understanding of what their roles and responsibilities are and what happens if they don’t abide. Not abiding by contracts can cause legal risks and messes up a company’s structure and processes. When drafting a contract, specify everything that different parties should be doing to ensure a stable contract period.
READ ALSO: What is Contract Administration?
4. Not Adding Renewal or Termination Dates
Always remember to add specific dates from the start period to the end period. This will ensure that the third party doesn’t just end the contract whenever they want to, unless there is a valid reason. But even then, all the specifics should be stated in the contract to avoid legal cases. It will also give you enough time to renew or end the contract once the time comes. You can do this on software that has a contract reminder, which is incredibly useful.
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5. Not Being Specific Enough
A contract drafting software can help you review the documents to add more details. You can start by writing an outline of the contract and then passing it to your team to expand on clauses and conditions. Even if it seems self-explanatory, it’s still a good practice to explain every little detail in the contract. This can avoid questions or uncertainty when approving and finalizing the contract.
An automated contract software is the best way to go about contract drafting. It can be a huge help and save time because everything you need to make the best contract can be executed on a single platform, from creation to collaboration, approvals, execution, and renewals. You can accomplish contract lifecycle management plus your team has access to it too.
So, you can say goodbye to the long hours of editing and reviewing a contract and produce seamless contracts.
Check out Revnue, an AI-based contract management software that has recently released a pre-signature phase, which now allows users to redline in real-time. All parties to the contract can edit and make suggestions for a faster contract drafting process.