TIPS FOR CONTRACT FORMATION

The contract formation process varies widely, from contracts formed quickly in face-to-face meetings to contracts formed after teams of attorneys have spent months in negotiations:

 Here are some general tips for all types of contracts:

 1. Write it down.

      All contracts should take the form of a written document signed by both parties. You do not have to hire an attorney to create a written contract. If you reach an agreement over the phone or in a meeting, write the agreement as soon as possible and have the other party sign the written memorandum. If you are making a written offer, you may want to make your offer in the form of a letter, with a space at the end for the offeree to indicate acceptance by signing.

2. Make sure you are comfortable with your obligations.

      If a term - for example, a deadline - makes you uneasy, make a counter-offer that substitutes a term with which you are more comfortable. Do not assume that the other party will excuse you from strict compliance and do not rely on the other party's oral assurances that it will not insist on strict compliance. Remember Murphy's Law.

      Before you sign a contract, consider what could go wrong or what could make performance of your obligations difficult or expensive. If the actual performance is more difficult or expensive than you anticipated, that is not a valid excuse for not performing. Enter into a contract only if you believe that you can meet your obligations.

3. Don't leave anything out.

 Accurately cover all aspects of your understanding with the other party. If the other party wrote the agreement based on an oral understanding reached earlier, make certain that the written terms match the terms of your oral agreement. Don't leave points out of the written document, even if the other party says, "We don't need to put that in writing."

4. Cover all options.

      Cover all options, consequences, and possibilities. You should not fail to address an issue because it is "sensitive."

Deal with the sensitive issue during the negotiations.

5. Don't use unclear language or try to sound like a lawyer.

       If you don't understand exactly what the other party is expecting you to do, don't try to camouflage the lack of understanding by using vague language. Vague language leads to misunderstandings, disputes, and lawsuits. Use simple language that accurately expresses your agreement with the other party. Don't try to sound like a lawyer, and don't complicate things unnecessarily.

6. Define any ambiguous terms.

      There's a classic contracts case in which one party contracted to sell chickens to the other party. The seller thought "chicken" meant chicken of any age, including old and tough chickens. The buyer assumed "chicken" meant tender young chickens suitable for frying. The seller shipped old chickens, and the buyer screamed "breach". To avoid such misunderstandings, define any terms that may be ambiguous.

7. Be careful using "terms of art."

      Terms of art are words with specific meaning in the law. "Assignment," for example, has a number of meanings in the English language. In intellectual property law, "assignment" means a transfer of ownership of intellectual property. Use "assignment" in your contracts when you mean transfer of ownership of intellectual property. Don’t uses the word in its other meanings or you will create

Confusion.

8. Use Terms Consistently.

      When you write contracts, you are creating your own "law." Legal writing is not creative writing. Don't use "royalty" in one paragraph, "license fee" in a second paragraph, and "use fee" in a third paragraph. Pick one term and stay with it throughout the contract. Good luck, again be very careful.