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How to write a contract agreement.
Create a business contract and discover the fastest, easiest way to get the signatures you need to make it legal.
What is a contract?
A contract is a binding and enforceable legal agreement between two or more parties. When parties sign a written agreement or binding contract, they voluntarily agree to act according to the rights and obligations defined in the document. Oral agreements are fine for small transactions, but everyone benefits from putting a contract in writing. Written contracts can ensure that your interests and other parties’ obligations are fulfilled according to the law, and they can spell out solutions if the legal contract is broken.
Types of contracts.
You can create a contract to formalize an agreement of any kind. These are the most common types.
Every sale is a contract between the buyer and seller. The buyer promises to pay for a property or service (including intellectual property like music or images), and the seller promises to transfer ownership of that property (often guaranteeing its condition) or perform that service. Examples of sales contracts include a promissory note, a bill of sale, a warranty or security agreement, and a purchase order.
These contracts set the terms of any type of employment, including services for hire from freelancers, consultants, small businesses, or other independent contractors. These types of contracts may also contain termination agreements in case the employee is fired, as well as nondisclosure agreements (NDAs) and confidentiality clauses, which protect the company from liability and disclosure of sensitive information. An employment contract might also include a noncompete contract to ensure that a competitor company doesn’t poach that employee.
General business agreements.
These binding agreements include all aspects of doing business, such as partnership formation, business owners, capital investment, and the sale or purchase of stock. NDAs, indemnity agreements (which cover compensation in case of harm or loss), or waivers of rights are also considered business agreements.
Parties to a dispute might agree to a settlement to avoid going to court. Before a dispute arises, business partners might sign a contract promising to use alternative means of dispute resolution, like arbitration and mediation, instead of pursuing legal action. In arbitration, a neutral third party decides the outcome, while in mediation a neutral third party tries to bring the sides together so they can find a mutually satisfying agreement. These are most common in franchise contracts and business sale agreements.
These types of contracts include leases for commercial, retail, residential, and parking spaces. They often detail maintenance expectations, requirements like tenant insurance, the amount of a security deposit, and the terms and conditions for its return upon completion of the lease.
Essential elements for writing a contract agreement.
To enter into a valid contract, all parties must clearly state their intention to enter into the contract and their agreement to every part of the contract. They must also have capacity, which means the parties understand the terms and obligations. If one of the parties is a minor, has a disability that prevents them from understanding the terms, or is intoxicated, they lack the capacity to sign the contract.
Other important features of every contract include:
- Basic information: Legal names and/or business names of the involved parties, their addresses, and a description of the property or service being exchanged for money or other consideration.
- Agreement: This is a statement of the terms of the contract, such as the rights and responsibilities of all involved parties. If the contract records a loan, this section might cover the payment terms.
- Specific considerations: This is a more detailed description of the property and/or terms, like the condition of the item, what the parties will and will not be responsible for, and what, if any, warranty or guarantees exist.
- Dates: Every agreement notes the date of sale, dates for any warranties in effect, and due dates for payment installments, if any.
- Null and void: This section explains how the contract can be nullified if there is a breach of contract.
- Signatures: It should be clear where all contracted parties must sign and/or initial. All parties should have a completed copy of the contract for their records.
Things to know before you sign.
Go in prepared by following these tips.
Get legal advice.
Contract law is complicated and full of nuance and, sometimes, legalese. Before you finalize a contract for your business, speak to an attorney who specializes in contract law, negotiations, and NDAs.
Get ready to haggle.
Negotiation is a natural part of any business relationship. Prepare to negotiate the terms of your contract. Know where you have room to give and where you have to stand firm.
Seal the deal.
Complete contracts quickly, securely, and legally with Adobe Acrobat Pro. Get started with free contract templates so you can create fillable forms you can send and get signed electronically. You can adjust contract agreements after they’ve been sent as long as recipients haven’t signed yet, and you can track each step in the contract process. Instead of taking days to finalize an agreement, you can do it in minutes, even if you’re doing business on the other side of the world.
Learn more about the benefits of digital workflows.
Find out how the Adobe legal and government relations teams reduced paperwork and sped up contract completion and accuracy with Adobe Acrobat Pro. By creating preapproved contract templates and establishing efficient workflows, these teams were able to shorten contract completion time by 73 percent.