Anatomy of a Contract (Part 1 of 3)

Always a question that concerns business owners is what should be included in a contract? The short answer: everything that is needed. However, there are ways to break up drafting a contract to make it easier to know what should be included, and when it is too much and jeopardizes the deal getting done.

Even though there are many different parts of a contract and some of them can be quite long, there is a way to think about contract drafting as a three part system. I call them “Information”, “Action”, and “Insurance”:

Information: This is the easy part of the contract, it simply states what the contract is about, who is involved, and where the actions should take place. Take a look at the top of a fictitious contract-

Sample Heading of Contract

This is about as simple as it comes, but it is illustrative as to the general idea of the “Information” stage of a contract. Often a more detailed explanation of what each party does, or perhaps where their relationship to each other is already at, but at the core of it, the “Information” section simply explains who is in the contract and what they want to contract for. This section is more formally known as the Recitals section.

Check out Part 2 – “Action” section of a contract