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Create Legal Contracts Without Hiring a Lawyer

If you're taking a do-it-yourself approach to business agreements, you must understand these seven essentials.

Opinions expressed by Entrepreneur contributors are their own.

Many new business owners find themselves in need of some kind ofwritten contract or agreement to use with customers or clients,vendors and perhaps others as well, so your question is a good one.First, a word about attorneys in general: Usually you can locate anattorney who understands your need to keep initial startup costslow and will be willing to work with you in a way that suits yourneeds and your budget. For example, you might bring theattorney a rough draft of your proposed contracts and the attorneywould review and revise what you created for a small fee. One ofthe best ways to locate attorneys who are accustomed to workingwith startups in this way is to obtain a referral list from yourlocal Small Business Development Center (SBDC). SBDCs are locatedon many college or university campuses throughout the country.Another good approach is to ask other business owners in yourindustry for recommendations.

When registering with an attorney, as with any professional,it's always a good idea to tell the attorney exactly what youwant done and find out in advance how much it will cost-at leastwithin some tolerable limits. Obviously, this is common senseadvice that applies to many of life's situations, but sometimesnew business owners get so impatient to "get going" thatthey put their common sense on hold.

Whether or not you're going to utilize this approach to yourcontract needs-part "do it yourself" and part "seekprofessional advice"- there are a few things about contractsyou should know.

The essential elements of a business agreement are:

1. The parties to the agreement. In other words, yourbusiness name and the name of the other party, whether that's acustomer or a vendor.

2. What each party is going to gain from the agreement.This is referred to in legal vocabulary asconsideration.

3. The main terms of the contract. For example, what eachparty is promising to do. Obviously, it's extremely importantthis part of the contract be very specific and include such thingsas the work to be performed, the price to be paid for the work, howand when payment will be made, when the work will be completed, howlong the contract will be in effect, and whether either party is"warranting" anything.

4. Additional terms should probably include: conditionsunder which either party can terminate the contract, whether eitherparty can transfer or assign the contract to another person orcompany, whether disputes arising from the contract may bearbitrated or mediated, payment of attorney's fees if one partybreaches the contract, an address where legal notices can be sentto each party, and which state law applies if questions about thecontract arise.

5. Execution. Be sure both parties sign the contract andthe person signing (if he or she is representing a company) has theauthority to sign.

6. Delivery. Make sure each party receives a copy of thefinal signed agreement.

7. Date. This is the date the contract is signed.

If you're going to attempt to save some legal fees bydrafting contracts on your own, the first step is to gather samplecontracts from other people in your industry, your trade orprofessional association or from contract form books you can findin your local library.

Take note: If you're selling or repairing new or usedvehicles or mobile homes; performing home repairs; rentingapartments or homes; providing funeral, burial, or cremationservices; or doing door-to-door sales, your contract may have tocomply with special rules in your state.

Carlotta Roberts has a J.D. degree from Atlanta Law School.Having worked in the areas of business organization, contracts andemployer/employee relations, she's been a consultant tosmall-business owners since 1981. She worked as a staff attorneyconcentrating in employment law issues before joining the SmallBusiness Development Center national network in 1986. Currentlyarea director for the Kennesaw State University Small BusinessDevelopment Center near Atlanta, she has developed two nationallyrecognized programs: The Cobb Micro Enterprise Council, which wonthe Vision 2000 award for small-business development in 1999, andthe Franchise Institute, developed to provide assistance tofranchisees.


The opinions expressed in this column are thoseof the author, not of Entrepreneur.com. All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.

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