Any business is prone to incur a loss and one of the main advantages of registration is that it offers limited liability protection and hence the business promoters are not liable for the liabilities of the business. There is no way of losing personal property.

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Drafting a contract is the act of writing the details of the contract in order to outline the obligations of both parties to the contract in order to make them understand their legal rights and responsibilities.

Benefits of Agreement and Contract

A written contract can provide proof of what was agreed between you and the hirer. help prevent misunderstandings or disputes by making the agreement clear from the outset. give you security and peace of mind by knowing you have work, for how long, and what you will be paid.

Written contracts generally protect your interests more effectively than a verbal agreement. In fact, some types of contracts are only binding when written.

Advantages of contracts include:

  • Provides proof of what was agreed between you and the other party.
  • Helps to prevent future misunderstandings or disputes by making the agreement clear from the beginning.
  • Gives you security and peace of mind by having the terms of the agreement down on paper which the terms do not change.

Steps in Drafting a Contract

Drafting an effective contract is a multi-step process, the main steps of which are:-

  • 1. Determining if all parties can participate in a contract.

In most cases, contracting parties must be over the age of 18. In all cases, contracting parties must be judged mentally fit to sign a contract. This includes not being under the influence of alcohol or other drugs at the time of signing. Coercion and duress may not be used to induce a contract signing.

  • 2. Determining the consideration of the contract.

The consideration is the exchange of some form of goods, services, intellectual property, or a promise of exchange for some form of compensation, without which a contract cannot exist. The elements of the consideration must be stated clearly for the contract to be effective.

  • 3. Determining the contract’s terms.

The terms should allow both parties to receive their desired end from the deal and be arrived at in good faith, meaning no attempt at deception was made. Such terms are also preferably expressed in written rather than oral form, as having a record of the contract will make enforcing it much easier. 

  • 4. Considering using a confidentiality clause.

If trade secrets or other confidential information is involved in your contract, then a confidentiality agreement is highly recommended. Such an agreement will ensure your sensitive information remains secure; if not, a breach of contract will have occurred

  • 5. Adding a dispute resolution clause.

This will detail how a breach of contract is to be handled, including who will pay attorney fees, whether arbitration or litigation will be used, and (in the case of litigation) what legal jurisdiction the breach will be resolved in.

  • 6. Including a termination of contract clause.

The length of the contract should be specified, as well as what actions by either party may bring about a premature termination of the contract. If the contract concerns ongoing services, a provision may be included to allow for prior notice (usually 30 days) to terminate the contract without cause.

  • 7. Making sure the contract adheres to the law.

Whatever your contract concerns, certainty should be made that it has been established within the bounds of any applicable laws. If not, the contract in part or in whole will not be enforceable. What jurisdiction a contract is to be interpreted in can be stipulated in the contract.

  • 8. Reserving the last page for signatures and dates.

If a contract is not signed and dated by both parties, it will not be considered to have been put into effect. All details of the contract should be understood by both parties before the contract is signed; if a party does not understand any element of it, legal counsel should be consulted.

  • 9. Offering the contract for acceptance.

Once a contract is drawn up, it should be offered to the other party concerned for consideration. If they accept it as is, then it will be signed, but a counteroffer will often be made instead.

  • 10. Negotiating the terms of the contract.

If a counteroffer is made, it is then up to you to accept the counteroffer or counter it with another offer. Often, such an exchange of offers will occur until a final offer that both parties agree upon has been negotiated. With every counteroffer, the entire contract should be reviewed so as to be certain that all changes made to it are understood.

  • 11. Signing the contract.

Once a final offer is agreed upon, both parties will sign and date the contract. Once this occurs, the contract will be legally binding. Both parties should keep a copy of the contract for their records.


● What is the drafting of an agreement?
Drafting a contract is the act of writing the details of the contract in order to outline the obligations of both the parties to the contract in order to make them understand their legal rights and responsibilities. Goal of Contract Drafting : To make each parties understand the terms and conditions of the contract.
● What are the basic essential elements of drafting an agreement?
A contract is valid and legally binding if the following six essential elements are present:
  • Offer
  • Acceptance
  • Consideration
  • Intention to create legal relations
  • Legality and capacity
  • Certainty
● What is the process of agreement?
Agreement processes: Establishment of agreements with organizational entities external to the organization and internal to the organization. The agreement processes consist of the acquisition process—used by acquiring organization—and the supply process—used by supplying organizations.
● What are the 4 elements of a valid contract?
The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.
● What are the sections of an agreement called?
Contracts are made up of three basic parts – an offer, an acceptance and consideration. The offer and acceptance are what the purpose of the agreement is between the parties.
● What is the difference between MOA and MOU?
An MOU is a document that describes very broad concepts of mutual understanding, goals, and plans shared by the parties. In contrast, an MOA is a document describing in detail the specific responsibilities of, and actions to be taken by, each of the parties so that their goals may be accomplished.
● How the execution of the agreement is done?
Documents are most commonly executed as simple contracts. A contract is made binding on the date that both parties intend that it is to come into effect, which is typically evidenced by both parties signing the agreement.
● What is the SAP MM contract?
In the MM Purchasing component, a contract is a type of outline purchase agreement against which release orders (releases) can be issued for agreed materials or services as and when required during a certain overall time frame.
● What is the most basic rule for a contract?
The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it.
● What is the difference between agreement and contract?
An agreement is any understanding or arrangement reached between two or more parties. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law.
● What are sections and clauses?
clause is (shipping) to amend (a bill of lading or similar document) while section is to cut, divide or separate into pieces.
● What are minutes of angle?
A Minute of Angle (MOA) is an angular measurement. A MOA is 1/60th of a degree. 1 MOA spreads about 1″ per 100 yards. ( actually 1.047″) 1 MOA is a different size at different distances, 8″ at 800 yards is still just 1 MOA.
● Is MOU valid in court?
As per Indian law, MoU is only enforceable in a court of law when it fulfills the provisions of the Indian Contract Act, 1872. To make it a valid agreement, the parties in an MoU should have a legally binding relationship to enter into an agreement.
● Do you need a counterparts clause?
In order to speed up the process of signing a document, the document may be signed 'in counterpart'. This is where a copy of the document is produced for each party signing. ... The document does not need to include a counterpart clause in order for it to be signed in counterpart.
● What the difference is between signed and executed?
An executed contract refers to a written legal agreement that has been agreed upon and signed by all parties to the contract. An executory contract, on the other hand, is a contract that has been agreed upon and signed but is still in progress.
● What makes an agreement legally binding?
In order for a contract to be considered binding, it must include the basic elements of a contract, including offer and acceptance, consideration, mutuality or intention, legality, and capacity. If a contract includes all of these elements, it is most likely a binding contract.