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10 Reasons Why You Need a Lawyer in Drafting a Contract

Many of us enter into contract everyday. Most of these contracts seem pretty straightforward that many of us don’t even put it into writing.

Mainly it is for convenience and practicality that most contracts are done verbal. Putting it in writing may even be a reason that a deal will not push through, especially if it’s just a one time transaction like in sales. But for contracts that involve future obligation, I strongly suggest you put it into writing.

Putting an agreement into writing avoids a lot of future conflict. One main reason why many opt not to put a contract in writing is because they never anticipated that their relationship with the other party may turn sour one day. But experience will tell, a friend whom you entered into a contract with, most likely becomes your worst enemy.

The usual culprit on why a conflict arises in a contract involving future obligation is unsatisfied expectation. For example, A and B entered into an agreement that A will wash the B’s laundry every Sunday of the week for Php 500.00. When they agreed to such a contract, it was a Sunday, so A immediately washed B’s laundry, which is around 50 pieces of clothes overall. During the next Sunday, A went to B’s house and washed his laundry, that is around 75 pieces of clothes. When A was done, she charged B Php 750.00 because she washed 50% more than what they agreed upon the other Sunday. A refused to pay the said amount and insisted on paying Php 500.00 only, as what they had also agreed upon. Therefore, a conflict arose between them.

The aforesaid conflict in the example above could have been easily avoided should the parties have written the contract between them. By doing so, expectations could be clearly laid out by both parties and no one can insist on something that is not written therein.

However, even if a contract has been written, there are still many instances that conflict could arise. Worse, such a contract could even be the source of the conflict itself because it was poorly written and is subject to conflicting interpretations. That is why it would be better to hand in the writing thereof to an expert. Here are the 10 reasons why you need a lawyer in drafting a contract:

1. Proper terminologies

Lawyers are trained to write, or else they won’t pass the Bar Exam. They are equipped with the knowledge on what terms to use and not to use in order to avoid confusion in what they are writing. For example, they know and are very conscious with the terms which could be interpreted as obligatory rather than discretionary, such as using the word “shall” in a contract. In ordinary documents, the word “shall” can be treated as merely discretionary, but in a contract, generally it is obligatory, unless of course both parties really intended it otherwise.

2. Clarity

You may have noticed that lawyers are often not content with just one word descriptions, like “null and void,” “valid and binding,”  “capricious and whimsical,” etc. You may think these are just thoughtless wordings made by lawyers, but no, those words were intentionally combined in order to achieve clarity and avoid ambiguity or be subject to more than one interpretation.

Generally, when lawyers draft a contract, his/her experience will dictate for him/her to think of possible issues that may arise in the interpretation of each provision he/she makes. Thus, often lawyers will make sure that the provisions are clear and concise in order to only show the real intention of the parties.

3. Completeness of provisions (all rights and obligations covered)

As mentioned above, many conflicts have arisen in a properly written contract such as those incomplete ones. In the example above between the contract of A and B, such contract may have been elementary complete, but incomplete as to avoiding future conflict.

The basic elements of a contract are: (1) consent – the meeting of the minds between the parties, (2) object – the thing, right, or service to be provided or performed  and (3) cause – the consideration or reason for the contract. If we dissect the contract between A and B, all basic elements were present, i.e. consent – they both agreed to it, object – the laundry service every Sunday, and cause – the Php 500.00 pay for the service.

However, as mentioned, although complete with the basic elements of a contract, such agreement even if written is still very prone to disputes. It is because it’s too generic and therefore incomplete as to specificity. Here’s where the experience of lawyers comes in to help clients avoid future conflicts when drafting contracts. Lawyer’s can immediately identify provisions that are too broad, could be subject to different interpretations by the parties and a possible source of conflict, hence, ask the parties for particulars.

For example, in A and B’s contract, the lawyer could have asked both in advance what the exact volume of laundry that A will wash for the price of Php 500.00 and what will be the additional pay should it exceed such volume. The lawyer will then include the period covered by the contract, the notice requirement should A would be absent to do the laundry, the penalty should she fails to notify, how to terminate the contract amicably, etc. Thus, with such provisions in place, future conflicts are likely lesser.

4. Proper explanation to parties

Although it may be true that lawyers may be asked by one party to draft the contract and the other will just ascend to the same, but generally, lawyers will explain to both parties each and every provision of the contract before asking them to sign. By doing so, each party is given the chance to review each provision carefully before agreeing to it.

5. Legal effect (notarized and not)

Most contracts have the same binding effect whether it’s oral or written, notarized or not. But some contracts, such as those involving real properties, need to be notarized in order to bind third parties or could be registered in the Registry of Deeds. So, when a contract will involve parties other than the signatories thereof, I strongly suggest you have it prepared and notarized by a lawyer. This way, you can also be assured you’ll not be embarrassed to show it to other parties and be sure it has all the necessary elements for it to be registered, if needed.

6. Default clause

In relation to completeness of a contract, having a default clause is a necessary element that most ordinary people fail to include when drafting a contract. Probably, no one really anticipated that one will fail to perform his/her end of the bargain when entering into an agreement. But as we all know, it is very likely.

Having a default clause or a provision stating that the other party has already failed to fulfill his/her obligation and demand can therefore be given is very essential in order to avoid future conflict. Having one in the contract is sometimes enough to discourage the parties in defaulting on their obligation, especially coupled by a penalty clause, which will be discussed below.

Putting a default clause in the contract will fix or engrave the demandable obligation of the defaulting party which makes the denial thereof very difficult to prove, hence, making the court action faster and easier should it come to that point.

7. Penalty clause

Having a penalty clause is one of the main deterrents for any party to default on his or her contractual obligation. This provision specifies the amount or consideration to be given to one party should the other fail to perform the agreed responsibility. This likewise fixes the damages to be given to the offended party by the court without the necessity to prove the amount of true damage, thus making the court process faster and easier.  That is why lawyers are keen on having this in each contract they are drafting because it makes their work later easier as well.

8. Acceleration clause

This clause is very important in contracts that involve staggered performance of obligations, such as installment payments, yet most ordinary people’s drafted contracts fail to include this. Perhaps they don’t give it much importance or  they don’t understand it at all.

An acceleration clause is a provision in the contract that makes the entire obligation due and demandable after if a specific requirement is not met.

For example, A borrowed from B the amount of Php 20,000.00, payable in 10 months at an equal installment payment of Php 2,000.00 per month. When A fails to pay in the first month, what B can demand from A is only what is due in that month, that is the Php 2,000.00, even if there is already a clear intention of A to abscond from such loan. However, if there was an acceleration clause stating that one non-payment of a monthly installment will make the entire obligation due and demandable, B could have demanded the entire Php 20,000.00 debt already and saved from the frustrations of waiting for the other installment payments to mature.

9. Alternative Dispute Resolution Clause

One of the main thrusts in the legal profession right now is to expedite the resolution of cases through any Alternative Dispute Resolution (ADR) mechanisms, which are Negotiation, Mediation, Conciliation, Early Neutral Evaluation and Arbitration.

We always hear the phrase, justice delayed is justice denied. Thus, no less than the Supreme Court encourages all opposing parties to avail of any forms of ADR to resolve their cases fast and likewise declog the dockets of the courts so that those cases that have to be taken care of by them solely can be expedited as well.

Thus, lawyers are trained to include ADR mechanisms in resolving disputes that may arise in the contracts that they are drafting. This way, the parties may settle their issues fast without the necessity of going to court.

10. Avoid future conflict

I have been repeating this reason since the start of this article, but I just have to repeat this again that this is really the main and the most important reason why you need a lawyer to draft your contract.

Lawyers are the masters in handling conflicts. Many of them will say they eat it for breakfast everyday. Thus, they are also the experts in avoiding them as well. So, the next time you need to draft a contract, be wise and hire a lawyer. Yes, you’ll spend something by doing so but surely you’ll save a lot more when you do not pay a lawyer later for an acceptance fee for a case that you had avoided in the first place.

Surely there are other reason/s why you need a lawyer to draft your contract aside from these ones mentioned above. I would love to hear your thoughts on this as well. Feel free to write your comments or feedback in the comments section below or email us at hello@visayanlawyer.com.

 

This article is not offered as a legal advice or opinion. It is for informational and educational purposes only.

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