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Common mistakes to avoid when drafting contracts

Common mistakes to avoid when drafting contracts


Business is full of agreements between individuals and corporations. Business contracts are legal documents binding contracting parties to certain rights and obligations.  So, when you are a small business owner, one minor mistake in drafting a contract may result in loss of time and money and could mean the end of your business.

We set out some common mistakes business owners make when they draft business contract:-


#1: Not Having a Formal Agreement

One of the common mistakes that business owners make is having informal contracts or not having a contract in the first place. A properly drafted written contract in place is important in protecting parties’ rights and obligations.

In the event that one of your business partners decides to leave the business without having performed certain duties or obligations, the written contract could provide for this partner’s duties clearly and would give the other partners legal grounds to hold him responsible for his duties provided under the contract.

#2: Not using a lawyer

It is not surprising that business owners make mistakes of entering into contract without having them reviewed by a lawyer as they think they can find a free sample online and/or sometimes contracts seem straight forward. However, having your contracts reviewed by a lawyer may save your business from potential risks and will avoid a situation that these contracts might not be valid and enforceable. Your lawyer can provide customised advice in accordance with your commercial needs.

#3: Making the contract in a rush without doing due diligence

In some instances, business owners are so eager to “close the deal” that they may make a contract hastily without doing proper due diligence.  If a deal appears too good to be true, the need of a due diligence exercise is even greater.


#4: Being too general

In order to avoid unnecessary disputes later on, the terms of your contract should be as clear and specific as possible – especially when it comes to payment terms, for example. Every term in the contract should be clearly explained to avoid any misunderstanding. All parties to a contract should be able to read on the same page.

#5: Failing to include certain provisions

To ensure that parties’ contractual intentions are captured, contracts should include well defined terms, unambiguous provisions (i.e., a choice of law provision should be clearly spelt out). For example,  the failure to include a choice of law provision may cause contractual disputes to be more difficult and expensive to resolve.

Omitting or overlooking certain clauses or aspects which should have been added into the contract may have dire consequences. This is most common for people who have never done this before. While it may seem harmless, some parts that do not seem important could turn out to be vital in enforcing the contract.

Find help from a lawyer to ensure that all the loose ends are secured and not left out. Contracts are extremely important in keeping financial responsibilities of all parties secure.

It is a smart move to be cautious to the extreme before the contract becomes binding than to be sorry later.


To learn more about contracts drafting,take our course on Essential Contract Law for Non-Legal Professionals or Managing Risks in Contracts & Outsourcing + Contract Law. Upcoming course date is on the 15-16 November 2016. More details can be found here:

Essential Contract Law for Non-Legal Professionals


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