Businesses enter into agreements on a daily basis. Some of these agreements become enforceable by law, which would then make the agreement a contract. When entering into a contract, each party to the contract would typically read through the document prior to signing. But the issue many businesses face is they do not fully understand what they are reading and the significance behind each provision.
In order to avoid this situation, businesses hire lawyers to read and write contracts for them. Unfortunately, not every business has the money to do that. So, businesses tend do it themselves.
Below are some tips to keep in mind when reviewing and creating contracts, in order to make them (legally) binding and understandable.
On every contract, each party to the contract must be legally identified. If the parties to the contract are businesses, each business must be identified by its legal name (the name on the trade license), its trade license number, and its registered address. If the parties to the contract are individuals, then the individuals must be identified by his/her nationality, passport number, Emirates ID number and address. Each of these factors listed is imperative to make each party liable for the terms of the contract.
What might seem like an ordinary word in colloquial language, may have several different meanings legally. That is why it is extremely important to define terms written in a contract. This may be a bit hard to see initially but try doing this: after reading each clause, think if there is any other way of interpreting that clause and how to prevent that from happening. More often than not, simply defining a term would help solve that issue. This is especially helpful with contracts involving a lot of technical terminology and jargon.
The language of the contract must be clear, concise and, most importantly, simple. When writing a contract, parties must remember that a judge or an arbitrator could potentially be reading it and they must be able to understand exactly the intentions of the parties through the contract alone. Ambiguity in a contract could lead to many issues, so try reading the contract from an outsider’s perspective; make sure the terms are understandable to anyone reading the document.
Signatures are the finalizing touch in binding a party to a contract. Ideally, each party should initial each page of the contract on the bottom and then sign and put the company stamp (in case of a business contract) on the final page. One important thing to note is the individual that is signing the contract on behalf of the company is legally allowed to bind their respective company to the contract.
Contracts identify a relationship between two or more parties and by following these above-mentioned tips, the relationship will not only become binding but it would be easily understood to the world as well.
This article is written by Samantha, a U.S. qualified attorney specializing in Civil Litigation and Dispute Resolution. Samantha carries extensive legal experience in USA and UAE including litigation, corporate, arbitration, criminal (both jurisdictions) and labor law.