Common Mistakes to Avoid When Drafting Contracts

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.