How to Write a Contract Between Two Individuals

By Ann White ; Updated June 05, 2017
Businessmen shake hands

A business contract is not only one of the best ways to ensure that both parties understand the nuances involved in the business agreement, but it also helps protect your and the other party’s interests when entering into an agreement. It is smart to write down all you need in an agreement so both parties can really understand what they are agreeing to. The following tips will help you craft a sound contract; remember to have your lawyer look over the contract drafts before signing on the dotted line.

To Lawyer Up or Not

Think about whether you can write a contract by yourself or if you will need to seek out legal help. Lawyers may be able to write the contract in such a way to allow you a legal way out of the contract. In some cases, it will be almost necessary to get a lawyer to help you to write a contract. If the contract is being written to control a highly important asset or agreement, you will almost definitely want to get a contract lawyer to help you draft your contract. If you are dealing with something less crucial, however, you can try to write a contract by yourself.

If you decide to try and write the contract yourself, know that it’s not necessary to use legal terminology. If two people agree on and sign a written document, it will serve as a legal contract. To that end, keep any contract you write as simple as possible to make sure that it will not be distracting.

When It's Not Binding

There are certain circumstances in which a contract is not considered binding. If a person is not mentally competent then the contract may not be upheld. For example, people with diminished mental capacity are often not held to a contract; nor are contracts made with or by minor children. Contracts that involve illegal activities like fraud are also not legally binding and may not be upheld in a court of law. In addition, it must have the consent and agreement of both parties in order to be considered legal.

Reasons for Breaking a Contract

There are times when it is acceptable to break a contract without legal risk. In some cases, it may be necessary to defend yourself in a court of law in order to prove that these situations exist. One of these reasons is called rescission, and it occurs when the contract states that either party has the right to cancel it if either party is not considered legally competent to be part of the contract or if both individuals decide to end it. Another reason for breaking a contract is when a person is led to believe something that is not true by the other party. This is called a mistake and can make the terms of the contract invalid. A bilateral mistake involves both parties making a mistake and can also invalidate the contract due to lack of consent. Pressure, or duress, to sign a contract, and fraudulent statements in the contract, can also be legal reasons to break it.

Writing a Simple Contract: Tips and Tricks

When approaching writing a contract, make sure that you include as much information as possible to prevent any conflict, but note that not every contract requires each of the below sections.

Introduce the Parties

First, introduce the parties involved in the contract and the date. This may look something like:

"This (Type of agreement) agreement is entered into as of (Date), between (full name of the first person) and _ full name of the second person."

Section 1 and 2: Party One and Party Two Obligations

The next two sections of your contract help define the obligations of both parties involved. For instance, maybe Party Two is expected to make a payment, and in exchange, Party One is expected to deliver goods or a service. The more specific you are on these sections, the less likely it will be that there’s a misunderstanding after the contract is signed.

Section 3 and 4: Additional Promises or Understandings

Though this section is optional, consider adding a section that details the minutiae of the contract. This can include information about the quality of the product that’s being exchanged, for example. For a contract to be valid, each party must have an obligation to provide products, services or monetary compensation. If either party does not have an equal amount of one of the three, then the contract could be held invalid as a gift, if later contested.

Examples for phrasing include:

" (party one) is hereby obligated to pay __ (party two) (monetary amount) for services rendered."

or

"On _ (date) _ (party one) shall deliver (amount and product) to (party two) in equal exchange for value of _ (party two's item)."

Section 5: Arbitration

Though not required, it may be advisable to list previously agreed remedies should either party fail to perform his or her portion of the contract. Remedies can include interest, late fees or discounts of products. Also consider including any penalties for defective or damaged products. Determine the court where a lawsuit will be filed or who will be in charge of arbitration, should neither party perform their portion of the contract. Remember to check with your state’s arbitration laws before agreeing to arbitration.

Section 6: General Provisions and Etc.

Consider adding some general provisions to the end of your contract. These may include addresses of the people on the contract, waivers and amendments, terms in case if something in the contract is severed and more. Always check in with your legal counsel before adding such language.

About the Author

Ann White is a freelance journalist with prior experience as a Corporate and Business Attorney and Family Law Mediator. She has written for multiple university newspapers and has published over 300 articles for publishers such as EHow and Garden Guides. White earned her Juris Doctor from Thomas Jefferson School of Law and a Bachelor of Arts in English literature.