Contract templates. Just those two words can give any contract professional some anxiety.
Crafting and updating contract templates can be a daunting task because of their importance to the business and how tediously time-consuming the process can be if you don’t know exactly where to begin. Being able to confidently craft clear and effective contract templates is integral to business operations and risk mitigation.
Whether you are creating new contract templates or revising your pre-existing contract templates, here are 10 ways to improve your contract templates so they are clear and effective.
1. Define the Scope of Services
Before you begin crafting a contract template, it’s essential to define the scope of services or products that are intended to be covered by that particular template. Clearly outline what services will be performed, by whom, and under what terms. Then perform a search to see where each defined term is used and whether they are properly capitalized throughout the document.
2. Organize Defined Terms
Using defined terms throughout your contract will help clarify any confusing language and keep the terms organized. Instead of repeating a phrase multiple times, you can capture it as a defined term which shortens the length of the contract and increases the readability of the document. Decide if it makes the most sense for your business to include a defined terms section at the beginning of the document or if there are a lot of defined terms, including them at the end or in an appendix. The key is that it is easy for a reviewer or user to find and understand the definitions in the context of the rest of the agreement.
3. Clearly State Obligations
Make sure that all obligations are clearly stated in the contract, including both the obligations of the service provider and the obligations of the client, and that you know why they are there and how much wiggle room you have with them in contract negotiations. Clearly outlining obligations will help to prevent misunderstandings and ensure that all parties know what is expected of them.
4. Consult with Business Leaders
To ensure that the scope of services, defined terms, and obligations are in line with current business practices, consult with internal business leaders. Schedule meetings where you can walk them through the template, describe what each of the clauses mean, and ask them for their feedback. It’s also important to periodically check back with them to ensure that the business information in your contract templates always reflects the latest business practices.
5. Keep it Simple
Although it is tempting, and some even may say fun, to showcase your legalese fluency prowess, try to avoid using superfluous legal jargon and keep your language simple and straightforward. Contracts that are overly complicated or filled with too much legalese can be confusing and difficult to understand, even for other lawyers. Do your fellow lawyers a solid and try to use plain language. It will make your contract more accessible to all parties involved, which is not only the nice thing to do but also reduces redlines and accelerates deals to completion faster.
6. Follow a Logical Order
To make your contracts easier to read and understand, it’s important that the terms follow a logical order. Generally, contracts follow a standard format, such as: introduction, definitions, scope of services, obligations, payment terms, termination, and then your other legal provisions. By following a standard format, you can make your contract templates user-friendly for anyone who needs to review it.
7. Incorporate Your Brand
Include your company logo on the template to bring more professionalism to the contract template’s appearance and easily track whether your template is used in a particular deal. But your branding goes beyond the use of your logo. Think about what kind of message you want to communicate with your template. For example, do you want others to consider your organization reasonable? Then it will be important to include reasonable terms in your contract templates.
In addition, I recommend keeping the font above a size 10 and sticking with reader-friendly fonts such as plain Arial and Calibri. Fonts that are too narrow or contain too many embellishments can make the contract harder to read.
8. Avoid Vagueness and Ambiguity
Contracts that are vague or ambiguous can lead to confusion, disputes, and legal issues down the road. It is natural to want to avoid spelling out every potential risk and issue between the parties because that is often hard to anticipate. However, going too vague or ambiguous can be more harmful than spelling out your actual known or anticipated issues. Remember, contracts are often construed against the drafter, so it’s essential to be as clear and specific as possible.
9. Use Examples
Using examples to help explain complex concepts in your contract templates is an often-overlooked life hack, particularly if you are a vendor. Provide examples to make it easier for the other party to understand complex areas such as their obligations, your obligations, and the respective representations and warranties.
10. Review and Revise
Finally, it’s important to periodically review and revise your contract templates to ensure that they are up-to-date and reflect any changes in your business practices and legal requirements. This will help you stay ahead of discrepancies between what the business is saying and what your contract says, as well as any potential legal issues. By making it routine to review and update your contract templates, you can ensure that they remain effective tools for protecting business interests.
By following the tips outlined above, you can confidently craft clear and effective contract templates that are legally sound, user-friendly, and reflective of your business’s practices and goals. As an added bonus, the simplicity of a good contract template can help build trust for lasting relationships with your clients, partners, and stakeholders.