Dispute Resolution
How to Draft a Contract

A contract is an agreement between two or more natural persons or legal entities. A contract can be in a written or oral form and aims to generate certain consequences. The contract is not more but the deal itself between the parties. However, the difference is that the contract is drafted with special norms, which regulate not only the procedure for its entry into force but also the grounds for termination and change of the contract’s provisions.

Understanding Preliminary Contracts

Apart from a contract, a preliminary contract also exists in the legal system. A preliminary contract regulates the precontractual relationship between parties and it must be drafted in a written form. Under a preliminary, parties intend to sign a contract in the future with the terms they agreed in a preliminary contract. 

Understanding Preliminary Contracts

Key Elements of a Legally Sound Contract

In drafting a contract, parties have the right to the freedom of agreement – they can determine the content within the scope of the law and what’s more, they are free to conclude contracts that are not prescribed by law but do not contravene it. 

Contracts are the backbone of business transactions, so much so that it is extremely important to draft a legally flawless contract. Although the contract is not necessary to be drafted by a lawyer, professional help is crucial to analyze risks, take into consideration parties’ needs, and draft a contract whose consequences will be clear and predictable for parties. 

In general, the contract may have a preamble and the main part. In the preamble, parties stipulate information on whether this agreement is based on another contract or not and mention their names, surnames, personal numbers, and addresses. If the contract is difficult to understand due to the specific terms, for more clarity it is preferable to have the definition of words in a contract. 

Key Parts of a Contract

In the main part, there is information about the things which are:

  1. The subject of the agreement – parties should write in detail what is the subject of the contract, what are they willing to happen. For example, if they are signing the purchase contract, in the subject of the agreement they should mention that one party gives another one the ownership of the car and the other one pays back the agreed amount of money.  If this article doesn’t exist in the agreement, then it becomes void. 
  2. The price of the contract and the procedure of payment. This information is also vital for a contract because the party should know how much he should pay and another party should know his right to how much he can demand. And of course, when the money should be paid – immediately after signing the contract, or later, – when and how exactly.
  3. The rights and obligations of the parties are one of the most important articles in the contract. Under this information, each party is aware of what he should do and how and what he can demand from another party. Without this article the contract is ambiguous and the consequences are unpredictable. The role of a qualified lawyer is priceless as he analyses the needs of parties and drafts a document, which is acceptable for both parties and provides the protection of the parties.
  4. The enforcement of the contract and the period of its validity – parties should indicate, what is the date when the contract enters into force and what is its expiration date. Parties are free to choose the period of the contract, which depends on the subject of the contract. What’s more, for instance, the employment contracts should be drafted in accordance with the Labor Code of Georgia.
  5. The clause about confidentiality should also be considered in a contract. If parties exchange information that is not available to everyone, they intend to preserve it from the public. Sometimes, when parties are companies, they also draft non-disclosure agreements for more safety as in this contract they specify in detail what is the confidential information, how long this agreement is valid, and so on.
  6. If a party violates his obligations under a contract, he should face liability. In civil codes, there is a general clause for regulating this issue. However, in the Georgian Civil Code, it is mentioned that the agreement between parties to demand a penalty from each other should be made in written form. Thus, to mitigate risks and to ensure that you have agreed on the specified type of liability, it should be written in the contract. The lawyer’s role is crucial in this aspect as well, because he stipulates the amount of penalty or other possible liabilities according to non-fulfillment or improper fulfillment of an obligation.
  7. The next essential clause for a contract shall be the dispute resolution. Nowadays it has become popular to resolve disputes by alternative dispute resolution institutes, which may be mediation or arbitration. For that purpose, it is important to mention which body you wish to consider your case. And for instance, if you are eager to go to the arbitration, you should clearly and unambiguously mention that information and also take into account what types of disputes an arbiter should consider. Otherwise, another party may doubt this clause and on the grounds of unclarity, the court will give a judgment.  
  8. In addition, parties can indicate not only the body, that can consider their case but also where will be the “seat” of this body and which country’s legislation will be applicable.
  9. Due to parties’ will or circumstances the provisions of the contract are changeable. For these changes, parties should mention this possibility in their contract and also the procedure for how it could be done.
  10. What’s more, in the world, we live in now, it is common to have agreements with other nationalities parties. For this reason, the contracts could be bilingual or more. Sometimes parties translate it into other languages as well. For that occasion, it is always a good idea to mention in a contract that if there is some inadmissibility between the languages, the specific one will prevail. 
Key Elements of a Legally Sound Contract

Conclusion: The Value of a Well-Drafted Contract

This article is a simplified summary of one of the difficult issues in law. The provisions mentioned above help you to navigate the process of drafting a contract, but it is not enough to feel safe and to protect your rights properly.

A contract is well written when both parties’ interests are equally protected and the contract itself resolves the dispute (if any) without court, arbitration, and so on. A qualified lawyer will draft such a contract, safeguard the process, and your interests, and provide the avoidance of additional expenses.

If you need to draft a professional contract, feel free to contact us.

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Lika Tsintsabadze

Founder of NOMOS Law Firm/Business Lawyer/Attorney at law lika@nomosgeorgia.com