50+ SAMPLE Draft Agreement
What Is a Draft Agreement?
First of all, what is a draft, in writing terms? A draft is referred to as a complete version of a document, but the key thing to note is that it is not the final document to be used or submitted for whatever purpose it may have. Drafting is the process of creating the document and this will usually take a bit of time since it may contain other parts of the writing process depending on the document being written such as revision, editing, and review.
A draft agreement can be considered as a legal document that is not finalized yet. Drafting legal agreements can be an essential skill to have since agreements/contracts are what are used during nearly every business activity that is of significance. In a draft agreement, the precise terms, clauses, and wording have not been agreed upon by all parties involved yet. Simply put, this document is a short-term agreement that can be used as a guide before finalizing a proper agreement.
Main Elements to be Included When Drafting an Agreement
There are many elements that you need to keep in mind whenever you start drafting an agreement document. In this section, the basics will be covered, as there are some unique elements that may be present depending on the type of agreement being drafted.
Title. This provision of the agreement is the first thing that the reader usually sees and it is used to denote or identify what the agreement’s nature is, whether it is a confidentiality agreement, a purchase agreement, and so on.Dates. This provision is usually split into two, which are the date of execution and the effective date of the agreement. The date of execution refers to the day on which the parties consent to execute or sign the agreement. Meanwhile, the effective date is the day on which the terms and conditions of the agreement become mutually applicable to the parties to the agreement and as such, they begin to comply with it. One thing to note is that in an agreement, the execution date and the effective date may not always be the same. An agreement with a different effective date than the day it was executed will clearly state the effective date.Parties of the Agreement. This provision will clearly indicate the names and addresses of the parties. Sometimes, identifiers are used such as grantor, debtor, etc. The identifiers are used to refer to the binding parties in the entirety of the agreement.Recitals. This element of the agreement is used to provide a background to the agreement, in other words, this part explains what circumstances have made the parties involved decide to come into an agreement. This section also commonly starts with the term “Whereas”.Consideration Clause. This clause in the agreement specifically identifies the payment in return for the promise of receiving something of value. Each and every party who enters and benefits from the agreement must be given consideration. The mode of payment and the payment times are also stated in this clause.Definition of Terms. This provision of an agreement usually defines all the complex and legalese terms for the purpose of preventing any misunderstandings throughout the duration of the agreement. Usually, the complex terms or the ones that need definition in the agreement are written in uppercase.Body of the Agreement. This provision serves as the core of the entire document. This part usually talks about the main subject matter of the document, such as the description of the goods or services to be provided throughout the agreement.Boilerplate Clauses. What is the point of including boilerplate clauses? Regardless of the type of agreement, every agreement must provide some standard clauses to ensure that the parties’ understanding is comprehensive. The text of these sections may differ from agreement to agreement and may necessitate adjustment based on what the parties anticipate from each other. Examples of boilerplate clauses include dispute resolution, indemnification, arbitration, governing law, and so on.Schedules. This section must be included in drafting an agreement since there are certain details that can be put into a schedule and can continue to remain binding on the parties involved.Signature. Finally, this section of the agreement is included in the last portions of the document since, in order for the agreement to be effective, the document must be signed by the parties involved in the agreement or their authorized representatives.
Different Types of Agreements
Listed and discussed below are the different types of agreements that someone in the business world may come across throughout their career:
Asset Purchase Agreement. The first type of agreement to be discussed here is an asset purchase agreement. What is it? An asset purchase agreement, also commonly known as a business purchase agreement, is a type of document that formalizes the purchase of a firm or a substantial commercial asset. It describes the deal’s structure, pricing, limits, and warranties.Partnership Agreement. A partnership agreement refers to a type of agreement that is specially established for business partners. To minimize avoidable disputes, you must have a partnership agreement in place if you are a part of a partnership, whether general or professional. Having a partnership agreement in place will assist you in navigating profit-sharing issues, day-to-day administration, and resolving disagreements if they arise.Employment Agreement. An employment agreement is a form of business agreement that is used to outline a company’s relationship with its employees. This legal document, also known as an offer letter, defines elements such as the employer’s and employee’s obligations and responsibilities, remuneration, benefits, length, and reasons for termination. During the recruiting process, employment agreements can be used to create an official connection between an employer and an employee.Inbound Agreement. This type of agreement document takes place when a licensor commits to hand over intellectual property rights to a licensee, enabling them to utilize some or all of the IP. In an inbound transaction, the licensee pays a fee to utilize the intellectual property or name of another brand for their products or services.Independent Contractor Agreement. An independent contractor agreement is a type of agreement that defines the scope, duties, and timeliness of independent contractor work. An independent contractor agreement also clarifies an individual’s categorization at work, as well as tax duties and payments. It confirms that the client-contractor relationship is not an employer-employee connection.Vendor Service Agreement. A vendor service agreement is a type of agreement that is used in business when engaging suppliers to offer products or services, and they explicitly state the terms and expectations of the agreement. A vendor service agreement specifies the deliverables that company owners and event planners envision, as well as the date, venue, and time of the event or service.Beta Agreement. This is a type of agreement that is made between a company and users who consent to utilize a product or service before it is officially released. These sorts of contracts are utilized in the company to ensure program secrecy and avoid liability difficulties. Users, in turn, send feedback to product developers, allowing them to make essential changes to their goods or services.Non-disclosure Agreement. This type of agreement is utilized to prohibit workers, vendors, distributors, and independent contractors from disclosing secret or proprietary business information to outside parties. It gives corporations the ability to sue when third parties expose sensitive information that might harm their operations.
How to Draft an Effective Agreement
In the world of business, having an effectively-written agreement can prove to be an advantageous asset when the protection of legal rights becomes a matter of discussion. With that being said, here are the steps to follow in order to draft an effective agreement document.
1. Gather the Required Information
Since agreements need to have information that pertains to the type of agreement entered upon by the parties involved, this step should begin the whole process, which is to gather all the information needed for the document to take shape. When performing this step, write down at the top of the agreement the names of the parties involved as well as their respective companies along with the effective date. It is also important to identify in this step the type of agreement being entered upon by the parties involved.
2. Write Down the Services or Products Offered
After gathering down the basic and required information and subsequently writing them down, this step will then follow. The important thing that should be done in this step is to identify or list down the items or services that are being offered in return for payment. Since broad or vague terms are greatly susceptible to interpretation, it is important to be very explicit in this area. Being on the wrong end of an agreement where a customer can urge you to produce more work than was agreed upon is generally unfavorable and can possibly happen even with a slight mishap.
3. Identify the Length of the Agreement
After writing down the services or products on offer, proceed to this step. What needs to be done here is to pay attention to how long the duration of the agreement will be. When it comes to the length of the agreement, businesses might have it terminate after a set period of time or provide a more specifically defined termination clause date. You may also specify in this area if the client is prepared to cooperate on an ongoing basis.
4. Outline the Clauses Regarding Repercussions
After determining how long the agreement is going to last, this step will then follow. The matter that needs to be discussed in this step is outlining any repercussions that the clients may face. In the corporate environment, claims for breach of contract and outright carelessness are prevalent. Make sure that clients understand the consequences of non-payment or non-delivery. Also, make sure to use the phrase “null and avoid” as needed in this area so that you no longer have to work with people who keep on failing to meet their responsibilities stated in the agreement.
5. Outline Clauses for Dispute Resolution
After creating the clauses concerning what needs to be done when the clients face a breach of contract or are being negligent to the terms, it is also good practice to outline terms concerning dispute resolution, which is going to be done in this step. This step should answer how will the companies deal with different types of disputes as they arise. Civil litigation is a traditional option, however, other choices are also present such as arbitration or mediation.
6. Signatures and Date Lines
Finally, after drafting the important and auxiliary clauses in the agreement, this step will close out the drafting process. This step is especially important since an agreement or a contract will not be deemed effective and enforceable unless the signatures of all the parties involved in the agreement are present. The datelines of when the signatures were affixed to the agreement must also be included.
How much time is needed to draft an agreement?
It varies by the type of agreement that is being entered. The time taken to draft an agreement is ultimately determined by your individual requirements. A simple, one-page agreement may take a few days to complete, but a large, intricate agreement may take many weeks or months. More important transactions frequently entail the discussion and reworking of a deal, which can significantly extend your timetable.
Should an agreement be drafted in full legalese?
Although it may be customary to believe that a decent agreement should be drafted in terminology that only a lawyer can comprehend, in reality, plain, concise language is preferred, especially if the individuals engaged in the agreement do not have a law degree. Short paragraphs are also preferable, and essential terminology should be defined properly.
What is an agreement?
By definition, an agreement refers to an understanding between two or more parties regarding their rights and duties toward one another. To form an agreement, parties must first agree on their respective rights and duties. An important distinction between an agreement and a contract is that an agreement is missing any of the contract’s requisite parts and has no legal force.
When entering the business world, it should be known that virtually anyone can draft an agreement between themselves and the client/clients whenever certain transactions have to be made. However, when finalizing the agreement, it is good practice that a lawyer’s help is to be sought after in order to iron out any hidden kinks in the document. In this article, different types and samples of draft agreement templates are available for you to have a look.