Who is Responsible for Writing the Contract: Me or the Other Side?
In most cases, you don’t start a potential business relationship or deal by first presenting a written contract. Instead, it might look like this:
Step 1 - You first meet or get introduced to each other.
Step 2 - You discuss and get to know each other’s needs and offerings, as well as potential synergies.
Step 3 - Then, you start negotiating the main, big ticket items for a potential relationship or deal (e.g., WHO is offering WHAT and for HOW much).
At this point, a majority of entrepreneurs and freelancers take one of three paths:
Option A - Wait for the other side to offer a contract. If they don’t, move forward with the deal on a handshake.
Option B - Ask the other side to prepare the contract based on your negotiations so far.
Option C - Write the contract yourself and give it to the other side to review and sign.
So what is the right approach?
Option A is clearly the riskiest option. Unless the stakes are very low, you want a written agreement to protect your business.
So many entrepreneurs and freelancers are afraid to either (1) ask for a contract or (2) write one or hire someone to write one. So they end up avoiding written contracts altogether!
And when things go terribly wrong, it ends up costing them more in terms of time, effort, money and emotions than getting a written contract done in the first place.
So that leaves Option B and Option C. Between these two options, the question is:
Who should be responsible for writing a contract?
Or to put it in another way:
Is it better to receive or write a contract?
Let’s break down the pros and cons for both.
Let’s say you go with Option B where you ask the other side to prepare the contract:
👍 Pros: They have to hire a lawyer to write a contract for them or spend the time and effort to do it themselves. All you have to do is review and comment on it.
👎 Cons: They get to set the tone of the negotiations going forward. Since they are drafting it, they can put things that are in their favor. Also, if you are dealing with someone who is uber sophisticated or particularly aggressive, they might “hide” things in between sentences.
When you go with Option C where you write the contract and offer it to the other side, the pros and cons are flipped around:
👍 Pros: You will have more leverage and control over the negotiations. when you offer the first draft with terms that are in your favor. Also, you hopefully understand and know everything in your contract so you don’t have to worry about anything being hidden in between the lines.
👎 Cons: You have to spend the money or time (or both!) to write the contract. That can mean paying a lawyer to write the contract for you or writing it yourself. BUT … there is a way you can save yourself time and money on this!
If there is a type of contract you use over and over again, you can save money and time by having a customized contract template specifically for your business ready to go at any given moment.
For example, let’s say your business provides consulting services.
You will likely use the a “consulting agreement” or “service agreement” with each of your clients.
Or if you’re the type of business that is always negotiating new deals, you will likely use a “non-disclosure agreement” or “confidentiality agreement” before sharing personal information with the other side.
There’s no need to reinvent the entire wheel when you have to enter into these types of contracts. Even if you hire a lawyer to write a customized contract template for you, you’ll recover the costs each time you use that contract over and over again. You’ll have peace of mind knowing that it was written specifically for the needs of your business.
So with that, Option C will generally come out as the best choice.
Offering your own contract will give you leverage and a little bit more control over the negotiations. You can offer terms that are in your favor first, leaving it up to the other side to notice them and request changes (which is sometimes the harder position to be in!). This is worth the upfront cost of getting a customized contract template made for you that you can use over and over again.
Disclaimer: This article is for informational and educational purposes only, it is not legal advice. It does not create an attorney-client relationship between you and Lawgood, its founders, or the author. If you need legal advice, you should hire a lawyer.
