Drafting a Contract

DRAFTING A CONTRACT

A PROPERLY DRAFTED CONTRACT HAS GENERALLY SIX PARTS:

CONTRACT NAME, PARTIES, WHEREAS CLAUSES, TERMS AND CONDITIONS,

MISCELLANEOUS PROVISIONS, SIGNATURE AND NOTARIAL DETAILS

©2015, Atty. Jericho B. del Puerto. All rights reserved. For permissions to use this material, send a request to this e-mail address: [email protected]

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“Contract management is a valuable knowledge and skill that every entrepreneur and professional manager must have.- Atty. Jericho B. Del Puerto

Business Lawyer & Legal ConsultantJDP Consulting Ltd. Co.

Business Law ProfessorSan Beda Graduate School of Business

Book Author, Legal Aspects of BusinessCentral Books Publishing

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What are the usual parts of a written contract?

A properly written contract has generally six parts:

contract name,

parties,

whereas clauses,

terms and conditions,

miscellaneous provisions,

signature and notarial details.

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SALES CONTRACT

Sales ContractThis Sales Contract is entered into on 09 May 2015 at Makati City by the following:

ABC Computers, Inc., a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal place of business at No. 214, XYC Street, Brgy. San Mateo, Makati City, represented herein by its General Manager, Ms. Anna D. Banal, hereinafter referred to as the “Seller”;

- and -

Mr. Michael S. Cruz, Filipino, of legal age, residing at No. 123, ABC Street, Brgy. Malaya, Manila City, Metro Manila, Philippines, hereinafter referred to as the “Buyer”.

Sample Written Contract

Contract Name

Parties

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SALES CONTRACT

WITNESSETH

WHEREAS, the Seller offered to sell 20 units of HP Laptop Model HP123 and which the Buyer has accepted to buy for Pesos: One Million (Php1,000,000.00), subject to the following terms and conditions.

NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereby agree as follows:

Terms and Conditions

1. The Seller and the Buyer hereby agree to the sale of sell 20 units of HP Laptop Model HP123 for Pesos: One Million (Php1,000,000.00).

2. The Buyer will make a deposit of 50% of the total purchase price upon execution of this agreement.

3. The Buyer shall pay the remaining amount within 24 hours from delivery of the 20 units of HP Laptop Model HP123.

4. The Seller shall deliver the sold items within 30 days from date of execution of this contract.


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Whereas Clauses

Terms and Conditions

SALES CONTRACT

Miscellaneous Provisions

1. In case of conflict, the parties hereby agree to settle the controversy by binding themselves to the exclusive jurisdiction of the regular courts of Makati City, to the exclusion of all other courts.

2. The laws of the Republic of the Philippines shall govern this contract.

3. In case of force majeure, the party affected shall not be held liable for non-performance of its contractual obligations herein.


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Miscellaneous Provisions

SALES CONTRACT

IN WITNESS WHEREOF, the parties have hereunto set their hands on the date and place above written.

ABC COMPUTERS, INC.

By: _______________ _______________

Ms. Anna D. BanalMr. Michael S. Cruz

General Manager


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Signatures

SALES CONTRACT

SUBSCRIBED AND SWORN TO BEFORE ME, a Notary Public, this 9th day of May, 2015, in the City of Makati, personally appeared the affiants with their respective evidence of competent identity: AD Banal – Driver’s License ABC123, MS Cruz – Driver’s License XYZ789.

Doc No. ___;Page No. ___;Serial No. ___;

Notary PublicSeries of 2015.


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Notarial Details

Do you need to have all of these parts?

No, a written contract is valid so long as the agreement reflect the essential requisites.

Consensual contracts: consent, object, consideration (3 requisites) Formal contracts: 3 requisites + in writing

Public document: 3 requisites + in writing +notarized

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What should be stated in each part of the written contract?

For each part, you should always think about the essential requisites and whether such are achieved in that section.

See next slides for more discussion.

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1. CONTRACT NAME

What’s in a name? For contracts, it can establish what kind of transaction that the parties entered into in their contract. This is particularly significant when the parties have different expectations in their written agreement.

Contracts are indicative of the intention of the parties. Did they enter into a sale or a mortgage of property?

While it is indicative, it is by no means controlling as the terms and conditions govern. Meaning, a contract may be declared a mortgage even if it is named as a sales contract due to the terms and conditions which show a mortgage transaction.

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2. PARTIES

Who will be bound? The parties are the players.

Only the persons who are parties to the contract may be bound and compelled to perform the obligations therein. It is, thus, significant to have ensure that the players in the contracts are made parties to the agreement.

Unlike the name of a contract, the proper designation of the parties is crucial. A contract only binds those who entered into it. This is the principle of relativity.

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3. WHEREAS CLAUSES

The section on whereas clauses can unravel what the parties really agreed upon.

This is especially helpful when the parties start to disagree as to what they really intended. When this happens, where do they turn to? They look at the whereas clauses.

These show the true intention of the parties. A majority of the issues on contracts relate to the determining what the parties really intended in their agreement.

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4. TERMS AND CONDITIONS

The terms and conditions are the controlling part of the contract.

In case of disagreement, the terms and conditions controls or governs the contract. Even if the written agreement is labeled as a sale but its terms and conditions reflect a lease, then the parties entered into a contract of lease.

It is, at this point, that you have to be careful in drafting or reviewing a contract. The so-called fine print is located here. Do not confine yourself with the name of the contract or the whereas clause. You have to read well the terms and conditions.

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5. MISCELLANEOUS PROVISIONS

The miscellaneous provisions are the additional clauses in a contract.

These special clauses reinforces or strengthens a contract. They likewise grant additional rights and create further obligations on the parties.

Thus, it is a commercial decision on whether to use them or not as the other party may not like it.

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5. MISCELLANEOUS PROVISIONS (EXAMPLES) Duty to amicably resolve controversy Jurisdiction Arbitration Governing Law Release, Waiver, and Quitclaim Free and Harmless Standard of Care Force Majeure Representations Relationship of the Parties

Non-waiver Non-disclosure Assignment Tax Consequences Penalties and Interest Separability Termination Effectivity Entirety

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6. SIGNATURE AND NOTARIAL DETAILS

The signature and notarial details are the last part of a contract which carry equal weight. What is worse than an unsigned contract? A contract signed by an unauthorized representative.

The signature is the manifestation of consent. A notarized document converts a private document into a public document.

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“Knowledge and skills in contract drafting is a valuable investment.

- Atty. Jericho B. Del Puerto

Business Lawyer & Legal ConsultantJDP Consulting Ltd. Co.

Business Law ProfessorSan Beda Graduate School of Business

Book Author, Legal Aspects of BusinessCentral Books Publishing

You may also want to visit:

www.legalaspects.phBusiness Laws & Best Legal Practices

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