An oral contract is not worth the paper on which it is written
Friends and colleagues ask me all the time, “John, what kinds of things should I include in my written contract for a car? For the purchase of a new house? In a business transaction?”
I have always found it helpful to use a checklist as a reminder of potential issues that should be considered.
Here are some of the things on my checklist that may be helpful to you. The complete checklist can be found in the book “How to Build a More Profitable Law Practice” by Noel Stevenson.
Definitions: Define any terms used in the contract that are open to interpretation, but remember that definitions are dangerous.
Parties: Names and addresses of the parties. Avoid using “match of the first part”, “match of the second part”. Instead, identify the parties by “Smith” and “Jones”, “Buyer” and “Seller” or “Landlord” and “Lessee”, “Exclusive Agent”.
Legal status: know the civil or legal status of the parties.
Execution date: the date of the contract. It is advisable to avoid using a “as of” date, as it indicates that the contract was not signed on that date.
Effective date: the effective date of the contract.
Arbitration: Provision for arbitration disputes.
Age and competence: Are the parties competent to hire? It is not advisable to trust appearances, sometimes an eighteen year old looks and acts over twenty one. When it comes to mental competence, normally all you can do is watch and hope for the best.
Jurisdiction: Consider including a recital of the law about which jurisdiction should apply to the contract.
Time is of the essence: Is it advisable to provide that time is the essence of the contract?
Performance Duties: Include in specific terms what performance each party is responsible for and when each obligation must be fulfilled.
Future changes to the law: Make provisions for any future changes to the law or administrative regulations that would affect the parties.
Performance / Reason for delays in: Making provisions for strikes, acts of war, acts of God or any other catastrophe that prevents or delays the performance of one of the parties.
Consideration: What is the consideration of the contract?
Modification: Provide that any modification of the contract must be made in writing.
Money payment: indicate the time and place of payment of any money.
Damages / Default: Anticipate damages, if they must be paid, in the event of default by one of the parties.
Cancellation / Provision for: If either party to the contract has the right to cancel the contract, include a provision for such cancellation.
Paragraph Headings: Consider including paragraph headings such as “Insurance”, “Notices”, “Non-Competition Agreement”. If these paragraph headings are included, state in the contract that these subject headings are for convenience and are not part of the contract.
Conclution
Good luck with your agreements. Remember that the most important thing when writing an agreement is that it should be designed to anticipate actual or potential ambiguities and difficulties, not for litigation. Unless your contract refers to six-figure settlements, you should stay away from lawyers and litigation – it’s too expensive, trust me! Remember, each of these items is negotiable. Use this checklist and you can negotiate like the pros (TM).
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