Contracts serve a very specific purpose. At its essence, contracts bring together a meeting of the minds – that’s the legal requirement to have a contract – an agreement of two or more persons. You’ll hear courts talk about offer, acceptance and consideration in determining whether a contract has been formed.
It’s pretty simple at a basic level to determine if a contract exists:
Offer: Did somebody offer something? Specific items, specific terms, specific benefits to convey.
Acceptance: Did the person accept those items and offer return consideration?
Consideration: Was there something flowing of value in both directions?
Offer, acceptance, consideration. That’s the simple elements of a contract formation.
Of course beyond that there is a lot more to a contract. A contract is the meeting of the minds. It’s people coming together and agreeing to do something in some way. One person’s doing something, another person’s doing something in return. An exchange.
A lot of times people write simple contracts and I’m all for simplicity. I think contracts should be written as simply as possible. However, simplicity can sometimes lead to vagueness or over broadness and that’s a problem.
Your contract should define your understanding. It should make sure everybody is on the same page. This is one of the greatest benefits of going through the contract process. If you do the contract process properly, you’ll have a conversation among the parties about who’s doing what and how and at what level and on what timeline.
This is a great benefit. If you leave your contracts too broad or too vague, you may leave open arguments or open disagreements. People may not be on the same page and we want to get everybody on the same page.
The contract drafting stage is a great time when everybody’s happy and has agreed to do a deal together. It’s the perfect time to stop and make sure everyone is agreed on the same page.
If you think stopping to write a contract is going to blow your deal up, I suggest you may have bigger problems. Everybody should understand exactly what everybody’s doing. There shouldn’t be any devil in the details because everybody should know where the other is doing.
Be specific. Agree on the tough issues. It will save lots of time and hassle later!
What’s been your experience with contracts? Have you been burned by vague contracts in the past? What will you do differently in the future? Join us in the comments below.
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Make sure everyone is on the same page when drafting a contract.
A contract is the meeting of the minds.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity.
About the Author
Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment (www.rshawnmcbridelive.com), gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at firstname.lastname@example.org or (214) 418-0258.
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