Recently, we wrote about the basics of written contracts — the “bare minimums,” so to speak. In this article, we offer a more detailed discussion expanding on those basic requirements and adding others. You need a good corporate lawyer to properly draft written contracts. Always remember that written contracts serve two primary functions: delineating/guiding the relationship between the parties, and avoiding litigation. The best method of accomplishing both tasks is to be clear and precise.

San Diego Corporate Law: Intermediate Level Contract Typical Contents

Parties

While identifying the parties is a basic requirement, this task actually requires some attention to detail, particularly when dealing with corporate entities. It is important to ensure that the exact and proper names are used in the contract including the legally designated “LLC,” “LLP,” “Corp.,” “Inc.,” etc. Likewise, for signature lines, full and formal legal names should be used along with the appropriate corporate titles (if applicable). If it is a business contract, you do not want the owner, Maria Catalonia, signing as an individual; rather she should be signing as “President” or other appropriate title.

Recitals

Recitals at the beginning of a contract are not necessary, but they can serve a useful function of defining terms and giving the “big picture” in the event that judge or jury has to read the contract. Recitals are usually written something like this: “WHEREAS, the Parties hereto wish to enter into an agreement with respect to the sale of apples … NOW THEREFORE, the Parties agree as follows: ….”

Statement of Consideration

To be valid, all contracts must have “consideration”; that is, something of value must be given or promised by each side. Consideration should not be an issue with contracts since it is often possible to describe with clarity what each side is giving or promising (example: money for apples). Typical wording is something like: “In consideration of [WHAT IS BEING EXCHANGED] and the mutual promises contained herein, the sufficiency of which is hereby acknowledged, the Parties hereto agree as follows: ….”

Obligations of the Parties

Along with consideration, to be valid and enforceable, a contract must demonstrate a “meeting of the minds” between the parties. That is, the parties must understand and agree on what are the obligations of the respective parties. Thus, a good written contract will detail all of the aspects of the contemplated transaction including:

  • Subject matter — apples being delivered
  • Price
  • Quantity
  • Quality
  • Time of performance for both parties — apples delivered no later than XX date and payment to be made within XX number of days
  • Location of performance for both parties — delivery to a certain address and payment made to whom at a certain address
  • Other details specific to your contract

Problem-Solving

Often, the parties to a contract can foresee certain problems or, in their respective experiences, certain problems have occurred in the past. Thus, a good written contract will have provisions that try to resolve various foreseeable problem in advance. These might include:

  • Provisions for “cover” or “cure”
  • Allowances for additional time to perform under defined circumstances
  • Risk of loss allocations
  • Indemnification
  • Insurance

Termination Provisions

All contracts could benefit from clearly stated termination provisions. However, this never more true than for a contract that specifies continuing obligations — delivering apples twice a month — then a good contract details the methods and means by which the obligations can be terminated. Often there are timing and notice requirements such as 30 days’ notice via certified mail or some similar method. Note that these provisions are for a unilateral termination; any contract can be terminated by the mutual consent of the parties.

San Diego Business Contracts: Contact San Diego Corporate Law

As we have said on this blog, every business “runs on contracts” and every San Diego business needs an experienced business attorney to provide legal advice concerning those contracts. Good written contracts protect your business and a trusted corporate attorney like Michael Leonard of San Diego Corporate Law can protect your business from “bad” contracts submitted by others. Contact Mr. Leonard via email or by calling (858) 483-9200.

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