Clear communication is the foundation of many successful business relationships. That’s why clarity is key when drafting a contract. Poorly worded agreements often lead to misunderstandings, unintended breach of contract and litigation.
Below are four tips to keep in mind to help you draft easy-to-understand business agreements.
Make responsibilities crystal clear
It’s crucial to define each party’s responsibilities clearly. Vague or ambiguous language will only lead to confusion. Some phrases you may want to avoid are:
- Reasonable efforts
- As soon as possible
- Timely manner
- Substantial raise
Instead, make sure your contract specifies the exact timelines, deadlines and other expectations or obligations.
Define all key terms
Every contract has its own set of terms that need precise definitions. Misunderstandings can arise if you fail to identify and clearly define these words or phrases. For example, you and the other party may have different interpretations of terms like “milestone” and “favorable market conditions.”
Include a section that defines all key terms used throughout the document. This practice ensures that all parties have a shared understanding of important concepts.
Practice consistent language
Consistency is crucial in contract writing. Using different terms to refer to the same concept or party can create unnecessary confusion. It’s best to choose one term and use it consistently.
For instance, if you refer to a company as “ABC Corporation” in one section, don’t switch to “ABC Inc.” or “the vendor” in another. Another example is using “client,” “customer” and “purchaser” interchangeably throughout the contract.
Avoid ambiguous pronouns
When using pronouns, make sure it’s clear who you are referring to in the contract. Using the name or noun is generally better. Even if it becomes repetitive, this practice may help you improve clarity and prevent future disputes. Mention who you are talking about directly. Use “the tenant” or “the supplier” instead of simply using “they” or “them.”
Ask a professional to proofread your contract
Using clear and concise language helps ensure that all parties involved are on the same page – which helps you prevent potential contract disputes. While these tips can help improve your contracts, your business agreements may still benefit from professional legal assistance. Consulting an experienced attorney to review and revise your contract can help you improve possible areas of confusion.
