Things to Know Before Drafting a Contract

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Contracts are an integral part of various aspects of our daily lives. Whether buying and selling goods, providing services, or receiving compensation, a contract is essential in transactional relationships. Contracts clarify the rights and obligations of the parties involved and help prevent potential disputes.

However, many people overlook or inadequately handle contract drafting. Especially in the early stages of a business, it’s easy to neglect contract drafting due to the many tasks at hand. But one should never forget that a small oversight can lead to significant losses.

So, what should you keep in mind when drafting a contract? Let’s go through the essential points one by one.

Organize Contract Details Specifically

Specify the Object of the Transaction

Clearly specify the goods or services that are the subject of the contract. It is essential to reduce any differences in perception between the parties by detailing quality, quantity, specifications, etc. For products, specify the model number or serial number, and for services, provide detailed descriptions of the scope and methods of delivery.

Specify Transaction Conditions

Clearly outline the conditions under which the transaction will occur, such as payment methods, delivery or provision timelines, and inspection procedures. If payments are to be made in installments, specify the schedule and amounts, and if delivery is delayed due to unforeseen circumstances like natural disasters, outline the handling procedures.

Clarify Intellectual Property Rights

If the contract results in the creation of intellectual property (patents, trademarks, copyrights, etc.), clearly define the ownership. It is advisable to specify which party will own the rights and under what conditions they can be used.

Verify the Identity and Authority of the Other Party

Verify the Representative When Contracting with Corporations

If the other party is a corporation, ensure that the contract is signed by a representative with the authority to do so. Verify the representative’s identity through corporate registry extracts, seal certificates, etc., and if an agent is signing the contract, obtain and keep a power of attorney.

Check the Creditworthiness of the Other Party

It is also important to check the creditworthiness of the other party, especially if a large amount of money is involved or if the transaction is long-term. Refer to credit evaluation agencies’ reports or review past transaction records for insight.

Review Relevant Laws and Risk Factors

Check Applicable Laws

The laws that apply vary depending on the type of transaction. Ensure you are familiar with relevant laws such as the Product Liability Act, Installment Sales Act, Electronic Commerce Act, and Door-to-Door Sales Act. A contract that does not meet legal requirements may not be recognized as valid.

Analyze Potential Risk Factors

It is beneficial to analyze potential risks in the transaction process. For example, if dealing with personal information, failing to comply with relevant laws can result in significant penalties. Pay careful attention to potential issues such as intellectual property infringement and third-party rights violations.

Ensure Clarity in Contract Wording

Include All Important Details

Ensure that the contract includes all essential elements such as the parties involved, the purpose of the contract, the contract period, rights and obligations, penalties, guarantees, and force majeure clauses. To avoid disputes arising from omissions, use a checklist to confirm that all necessary details are included.

Use Simple and Specific Language

Use clear and simple language rather than complex legal terms. However, be careful not to use overly simplistic expressions. Rights and obligations should be stated specifically and unambiguously to prevent multiple interpretations.

Reflect Special Agreements

If there are any special agreements between the parties, ensure they are included in the contract. Even if the terms differ from common practice, if both parties agree, they should be explicitly stated. However, be aware that terms violating mandatory regulations may not be enforceable.

Beware of Unfair Clauses

Clauses that are excessively unfavorable to one party violate the principle of fairness. They may be deemed invalid under the law and can damage the trust relationship. Common unfair clauses include excessive penalties, unfair compensation provisions, and unilateral termination rights. If you suspect unfairness in the contract, seek an objective review from a professional.

We have reviewed the essential points to consider when drafting a contract. The key is to minimize uncertainties and create a clear and specific contract. Furthermore, it is recommended to use a spell checker to finalize the review. Check out 맞춤법 검사기 for more details. No matter how good the content, typos or spelling errors can undermine professionalism. Therefore, using a spell checker is a good habit to enhance the completeness of your contract. Pay attention to spacing and punctuation to improve readability and reduce misunderstandings. Carefully read and revise the contract multiple times before finalizing it.

If you face difficulties with the contract content, do not hesitate to seek help from legal professionals. A well-drafted contract can greatly assist in exercising your rights and fulfilling your obligations. Moreover, it can enhance mutual trust and positively impact long-term relationships.

We hope this guide helps ensure your safe transactions. Thank you.