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Drafting a Contract: A How-To-Guide

Real estate agents are drafting sales contracts for customers.

Contract drafting and negotiation can often be a frustrating process when you don’t have the right tools or strategy. Whether it is not having the right template for the deal, or clauses drafted in vague and obscure language, contract drafting can at times be a very complex and laborious task. In this blog post we outline the step-by-step process to drafting a contract and include some tips to help you draft better contracts.

Step 1: Translate the commercial language in your client’s instructions to legal language

The first step in drafting a contract is to read through your client’s instructions and translate it into legal language. The way to do this is to separate the information into different categories such as the subject matter of the contract, obligations of the parties, fees to be paid, liability, representations and warranties, conditions and other categories as is needed. You can highlight different sections of your client’s instructions in different colours to correspond with that category. These different categories will serve as the building blocks for the contract later once you start to draft the clauses.

Step 2: Choose the right precedent

Once it is clear what the commercial terms of the deal are, and you have separated the information into the different categories, you can then choose the correct precedent which will be adapted to suit the terms of the deal.

Step 3: Fill in the precedent with the details of the parties

The first thing to do once you choose your precedent is to fill in the party names, their addresses, the ABN or ACN, the governing law, the jurisdiction, the term of the contract, and any other information which is easily inserted into the template. At this stage you can also create the execution blocks for the parties. Make sure to choose the right execution block depending on whether the party is a company, a trust, or an individual and, if it is a company, whether the company has a sole director or two or more directors.

Step 4: Begin drafting

Read through the precedent and begin drafting and modifying clauses to suit the deal. This part should be easier as you have already broken down the language in the instructions and now only have to draft clauses which reflect the deal. In the drafting stage it is important to use clear and concise language to communicate the deal. Plain language contracts are easier to read and generally help facilitate a faster negotiation process as the parties are not arguing over vague and ambiguous language.

Step 5: Review the draft

After you have drafted the clauses, read the contract a few more times to see if you have missed anything or if any improvements can be made to the language. If you are sure that the contract is complete, then send it to the client to review and provide you with any feedback. Generally, for a simple contract it may take one or two drafts before the client is satisfied. For bigger commercial deals such as M&A transactions, the negotiation process between the parties to the contract may take a few weeks or even a few months.

Arnotts Technology Lawyers are experts in contract drafting. Our extensive experience working with a wide range of technology and telecommunications clients means that we have a comprehensive understanding of the legal, technical and commercial angles of a deal. From drafting startup legal documents to software agreements, our technology lawyers understand how to draft technical agreements to ensure your interests are protected. Get in touch with us today or call us on 1800 749 294 to see how we can help draft and negotiate your contracts.

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