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- 1). Without going into detail that is beyond the scope of this article, there are basically three main elements of a contract. Those elements are an offer, acceptance, and consideration. The term consideration means that each party must exchange something of value with the other party. It doesn't always have to be money, but it must be something of real value. In order for the offer and acceptance to be valid there needs to be the same understanding between the parties of what the terms of the contract are. Basically a meeting of the minds. Once you have these elements met, you can start drafting your contract. You can use a form contract that you can get online, at the library, or at a office supply store; or you can write your own.
- 2). The first section should contain the names of the parties entering into the contract. This should be their given names unless they are entering into the contract as a business that is run as an LLC, Partnership, or Corporation. If any of those business types apply, the party is the company. If you are a sole proprietor, then your name and company goes in this space. There will be a general statement that the parties intend to enter into an agreement.
- 3). The next section should contain a statement of what the consideration is that each party is offering in exchange for their performance under the contract. That would be the amount of money, goods, or labor, etc. For example, "In exchange for $1000.00 to be paid up front by Mr. X, Mr. Y agrees to paint the outside of the home of Mr. X, located at xxxxxxxxxx Street, and to have subject painting done by the ---- day of ------, 2---."
- 4). The next section should contain any additional conditions that are important to the satisfactory completion of the contract for both parties. In the case above, that might be the use of certain brands of paint or that the work is to be done during certain hours, etc.
- 5). Next you should include a statement of what the consequences will be if one or both parties breach the contract. In other words, what happens if they don't do what they promised. That might be a penalty for finishing the job late, or a delay of the start of work until payment is received. It could also include a statement that either party has the right to pursue all legal remedies available under the law of the state of --------. (The state where the contract was entered into). Note here that if you write a consequence that is not legal, then the law, not the terms of the contract, applies,
- 6). Next there should be a statement that the contract contains all the terms and agreements of the parties, and that the agreement is binding on their heirs, heirs, executors, administrators, successors and assigns. This protects both parties from the other stating that there was more to the agreement that what was written. It also helps to protect them from not being able to collect what is due under the contract if the other party dies or sells their interest in it.
- 7). Finally, both parties must sign and date the contract. It doesn't hurt to have witnesses or to have the signatures notarized in case there is ever a dispute as to who signed the document. If you are signing on behalf of a business entity, you should state your capacity to show you have authority to enter into the agreement. For example, President, CEO, Purchasing Manager, etc.
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