From Handshake to Pen and Paper: Transforming Verbal Agreements into Legally Binding Contracts

Once you reach a deal in principle, the next step is to put pen to paper. Entering into a written contract is essential for protecting the interests of both parties, and carefully negotiating a well-written contract will help mitigate the risk of litigation in the future.

Different types of agreements call for different contract terms and conditions. As a result, there is no “right” way to draft a contract—other than to ensure that the contract accurately reflects the terms of the deal, anticipates all reasonable contingencies and apportions risk appropriately. With that said, most business contracts will need to incorporate several common terms, including (but not limited to) the following:

Substantive Deal Terms

The substantive deal terms are at the center of any business contract. All contracts should clearly outline the substantive terms of the deal, which may include things like:

• Term and Renewal
• Pricing
• Delivery Dates
• Quality Standards or Service Level Agreements (SLAs)
• Representations and Warranties

Putting pen to paper on substantive deal terms can be a fairly quick process in some cases. But, in others, it can expose considerations that the parties have overlooked in their negotiations to date. In either scenario, it is critical that both parties work with their counsel to ensure that they share a clear, comprehensive and mutual understanding of their deal.

Default, Cure, Termination and Remedies

Any time you are negotiating a business contract, it is important to think about what can go wrong. Even when both parties enter into a deal with the best of intentions, circumstances can change, and their financial wherewithal, goals and interests can change over time. With these considerations in mind, carefully negotiating terms such as default, cure, termination rights and pre- and post-termination remedies can help to avoid costly litigation down the line.

Liability-Shifting Provisions

Business contracts may include various types of liability-shifting provisions. Some of the most common examples include indemnification clauses, damages caps and mandatory insurance provisions. Appropriately apportioning liability between the parties is essential for ensuring that each party’s risks are proportional to its anticipated benefits from the deal.

Choice of Law, Choice of Jurisdiction and Dispute Resolution

Choice of law clauses are essential for ensuring that a business contract will be interpreted consistently with the parties’ mutual understanding and intent. Choice of jurisdiction clauses provide certainty in the event of a dispute. Dispute resolution clauses afford the opportunity to avoid (or shift) the financial burdens of litigation, including by requiring mediation, arbitration or both.

Integration, Force Majeure and Other “Boilerplate” Terms

Finally, while most casual readers will skip over the “boilerplate” terms in their contracts, these are among the most important provisions in any agreement. When drafted appropriately, provisions such as integration clauses and force majeure clauses will provide critical protections in the event of a dispute or unforeseen set of circumstances.

Schedule an Appointment with a Business Lawyer at Rendigs

At Rendigs, our business lawyers have extensive experience drafting and negotiating all types of complex corporate and commercial agreements. To discuss your contract needs with one of our lawyers in confidence, give us a call at 513-381-9200 or tell us how we can help online today.