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Well Written Contracts Can Make and Save You Money

Poorly written, unduly complex, and legalistic service agreements cost your business money. Well written contracts can help you make more money.

Think all contracts are the same? Take a look at the following two short paragraphs:

This Agreement constitutes the final, complete and exclusive understanding between the parties with respect to its subject matter and supersedes all prior or contemporaneous agreements in regard thereto. The parties have not relied upon any promises, warranties or undertakings other than those expressly set forth in this Agreement.

Now consider the following

This agreement is the entire understanding of the parties with respect to its subject and it replaces all prior or contemporaneous understandings. The parties are not relying on any promises other than those in this agreement.

These paragraphs essentially say the same thing. But the differences are stark. For starters, the former is 12 words – a full 33% – longer. Plus, the former is full of legalese, redundancies, passive voice, and $10 words where $.10 words would do. The latter has shorter sentences and less passive voice making it easier to read and understand. Magnified to an entire services agreement and it means pages more dense text, legalese, redundancy, and complexity. More work for everyone.

And that extra work has a cost on your business.

At its most basic, complicated contracts take more time to negotiate. That’s more rounds of revision, more legal expenses, and more time when your team is idle instead of working. Easily understood contracts help you reach an agreement more quickly. Once you reach an agreement, you can get the deposit in the door and billing work started.

Complicated and legalistic contracts also reduce trust. Trust is key to resolving problems that arise during a project. I’ve also never met an agency where trust isn’t at least an implied part of the brand. A more easily understood contract communicates that your and work is trustworthy. This mindset has small effects, like encouraging teams to work together when there is a bump in the road. It also has large effects, like helping clients perceive greater value in your work leading them to buy more of it.

Poorly written contracts also impede understanding. Remember that coming to a mutual understanding about the work to be done is the key goal of contracts. And if your client literally cannot understand your contract, don’t be surprised when your client does things that you thought your contract prohibited or that undermine the project.

So, take a look at your contract. Is it more like the first example or the second? When you think about how your team spends its time with contracts, is it productive? Or is it just a busy paperwork no one understands. Writing contracts well is a big part of what we do at CreateLegal. If your contract is more like the first example, talk to a lawyer about how clearly written contracts can shorten negotiation time, increase trust, and facilitate productive understanding.