As a business lawyer in Toronto, I frequently work with entrepreneurs, founders and corporate clients to draft various business contracts. Whether partnership agreements, sponsorship deals, consulting contracts or technology transfer agreements, having well-drafted, legally enforceable contracts is crucial for any business. However, rushing through the contract drafting process or taking a “do-it-yourself” approach can often lead to mistakes that undermine the effectiveness and enforceability of agreements.
As your contracts lawyer in Toronto, helping clients avoid common pitfalls when drafting contracts is vital to my practice. In this extensive blog post, I will outline ten of the most frequent mistakes I see companies make when drafting agreements independently without legal counsel. By understanding these problems, you can take proactive steps to work with an experienced business contracts lawyer like myself to ensure that your contracts achieve their intended purpose and stand up to legal scrutiny. Let’s get started!
Lack of Clarity and Precision
One of the biggest mistakes I often find with contracts drafted without legal input is a need for more precision and clarity in the language used. Contract terms must be unambiguous so there is no room for differing interpretations. Here are a few examples to avoid:
Vague Language
Words and phrases like “reasonable,” “appropriate,” or “standard” without further definition leave a lot of ambiguity. What one party views as reasonable, the other may see as unreasonable. Always define terms specifically to eliminate uncertainty.
Imprecise Terminology
Using generic terms instead of well-defined concepts creates confusion. For example, say “equipment” without specifying whether you mean machinery, tools, hardware, etc. Be precise in your wording.
Broad Statements of Obligation
Don’t leave obligations too open-ended or undefined. Phrases like “party A will provide necessary support” are vague - support could mean many things. Be specific about what, when, and how obligations will be fulfilled.
As a contracts lawyer in Toronto, part of my job is to ensure clients avoid such ambiguity by using clear, concise, and unambiguous language throughout agreements. Precision is critical to preventing disputes over contractual terms and obligations.
Failure to Address Key Business Terms
Another common area for improvement in DIY contracts is a failure to address essential business terms critical to any agreement. At a minimum, contracts should spell out:
Scope of work/product or service
Delivery terms
Pricing and payment terms
Intellectual property ownership
Confidentiality obligations
Warranties and disclaimers
Liability and indemnification
Termination rights
Governing law and dispute resolution
Leaving any of these critical constructs undefined is a recipe for problems. As an experienced business contracts lawyer, I know the importance of comprehensively addressing all material terms to create a legally binding contract.
Inadequate Risk Allocation
Contracts must also properly allocate risk between parties. Often, DIY agreements gloss over or completely ignore how various risks are distributed. As a result, critical questions like who bears liability for delays, defects, security breaches, or third-party claims need to be answered.
Proper risk allocation involves clearly stating:
Which party carries insurance and coverage levels
Who assumes responsibility for meeting obligations
Circumstances allowing non-performance or termination
Express warranty and limitation of liability language
Types of losses that are indemnified
Liquidated damages for non-performance
By ensuring contracts address these risk questions, businesses can avoid exposure and have certainty around responsibilities. As a contracts lawyer in Toronto, I advise strongly on this area.
Ignoring Legal Formalities
Drafting contracts also requires adhering to specific procedures and formalities to ensure validity and enforceability. Some key checkpoints include:
Signatures - Using proper signature blocks for individuals and authorized representatives
Witnesses - Including spaces for witnesses where required, such as real estate deals
Notarization - Obtaining notarial certificates for affidavits or statutory declarations
Curing defects - Providing for ratification of defects discovered post-execution
Required Terms - Including mandatory clauses like entire agreement, assignment terms
While formalities may seem minor, non-compliance can threaten a contract’s legal standing. So pay attention to these details - I provide expertise as part of my contracts lawyer services in Toronto.
Lack of Contingency Planning
Future-proofing contracts to account for unanticipated events or changed circumstances down the road is also essential. Common omissions include not contemplating:
Force majeure clauses covering natural disasters, pandemics, etc.
Options for extensions, renewals or renegotiation
Early termination or cancellation scenarios
Rights and processes regarding assignment/transfer
Escalation, mediation or baseball arbitration covenants
Amendment procedures over the agreement’s life
With the proper guidance from an experienced contracts lawyer, these contingencies don’t need to be an afterthought. Plan for what’s around the corner.
Working with an Experienced Contracts Lawyer
In summary, while do-it-yourself contract drafting may initially seem cheaper or more accessible, the mistakes outlined can nullify agreements or land businesses in hot water. Relying on untrained judgment poses unacceptable legal and commercial risks.
At Froese Law, our business lawyers have years of experience negotiating and drafting legally enforceable agreements for all contracts, industries and commercial relationships. We understand the technical and practical considerations necessary to ensure contracts are solidly structured from start to finish.
Some of the value a contracts lawyer brings include:
Identifying material issues requiring explicit terms
Addressing unique aspects of industries/sectors
Custom tailoring templates based on specific context
Performing due diligence on counterparties and dealings
Structuring terms to align with overall business/legal strategy
Leveraging precedents and modifying templates appropriately
Providing certainty and reducing ambiguity for all parties
Drafting logically with clear and concise legal language
Advising on formalities, procedures and local legal requirements
Addressing risk allocation and remedies comprehensively
Reviewing and identifying issues throughout the negotiation process
Creating paper trails and documented processes for performance
Suggesting revisions based on experience with enforcement
Protect Your Business by Investing in the Best Contract Lawyers
Investing in experienced legal counsel takes the guesswork out of contract drafting and protects businesses from many pitfalls. It also adds tremendous value by ensuring agreements are signed, meet commercial objectives and are held together in court or arbitration if required.
If you need help with contract drafting, negotiation, or review for your business, please contact Froese Law. As your contracts lawyer in Toronto, we’d happily apply our expertise to protect your interests through customized, enforceable agreements crafted by experienced professionals.