Drawing up a Contract Without a Legal Background - Is That Possible and Allowed?

1. What is a contract?
2. What types of contracts are there?
3. Internal contracts are, for example, employment contracts with employees or even the very first contract: the partnership agreement. Company-internal contracts are all contracts that you do not conclude with external, but with internal contract partners.
4. Fact is, if someone gets presented an obviously unprofessionally created contract, they would question the seriousness of their counterpart. Therefore, not only the content but also the appearance and the lack of errors play a decisive role when setting up a contract.
5. "Simple and professional" is the motto. Build your contract in a simple and understandable way. Make sure not to get involved in too many levels - make it as easy as possible for your readers to understand legal texts. This way, your contract partners can quickly review and sign the contract.
6. In principle, it is possible to set up a purchase contract yourself. But you should be aware that a defective or incomplete purchase contract has legal consequences. It is therefore advisable to resort to legal help or specially developed software.
7. First, you have to name the parties exactly. Make sure to provide the correct company names and legal forms. The liability conditions of a GmbH, for example, differ from those of a corporation.
8. Contracts can look very different: oral, written or through a reaction or lack of reaction. For example, a contract can be concluded if recipients keep the goods even though they didn't order them. So there is no universal answer to what a contract must look like exactly. Usually it depends on the situation. There are also differences between legal transactions in the B2B and B2C sectors.
9. Our tips for saving costs when creating a contract
10. For standard contracts, the chambers of commerce of all countries provide free samples. Here you only have to fill in your data and that of your customers and have signature on the contract afterwards. However, in practice it's quite rare that these sample contracts meet all requirements.
11. Fazit: Das ist der beste Weg, um einen Vertrag aufzusetzen

At some point in school, we all learned that a contract is the agreement of several declarations of intent - written or oral. We continually make contracts in everyday life, even if we're just paying for our purchases at the supermarket checkout.

Businesses are constantly drawing up contracts, whether they're start-ups or grown-ups. But is it just as straightforward in everyday business as it is on a private level? Or can only certain individuals create legally binding contracts? What differences are there between the various types of contracts? Do the same rules apply to internal and external contracts? We'll show you what you should pay attention to when dealing with contracts and how you should best proceed when creating a contract.

What is a contract?

The theory: A contract is a legal transaction with at least two declarations of intent that correspond between natural or legal persons. According to §§ 145 ff. BGB (German Civil Code), contracts arise through offer and acceptance. They come into existence in private law, public law and international law.The practice: There is always an offer and an acceptance in your daily business. One party expresses their intent, e.g., through a sales offer. All conditions are discussed in detail. These can be prices, delivery conditions and payment conditions. The second party must agree to the details of the offer, i.e., also make a declaration of intent. The contract becomes valid upon acceptance of the offer (order confirmation).

What is contract management?Written contracts are enormously important in everyday business life and are constantly needed: in the HR department and for agreements with customers, suppliers and other business partners. As you can probably imagine, a lot of documents come together. Without structured contract management, you quickly lose track. This can have fatal consequences for your company, as contracts can expire, (termination) deadlines can elapse and penalties can accrue due to non-compliance with contract contents. In the worst case scenario, the consequences of contract breach can cost companies their existence.

What types of contracts are there?

Corporate internal contracts

Internal contracts are, for example, employment contracts with employees or even the very first contract: the partnership agreement. Company-internal contracts are all contracts that you do not conclude with external, but with internal contract partners.

The employment contract regulates, among other things, working hours, conditions, salaries and other company benefits. To be on the safe side in terms of labor law, as employers you should always keep your rights and obligations as well as those of your employees in mind. A web-based software solution can help you with this.

Contract management software

such as or monitors deadlines, terminations or extensions automatically.ContractHero

(Jetzt kostenlos testen)

(Jetzt Demo vereinbaren)

The number of contract partners can quickly increase. This is hardly manageable without technical support. Whoever overlooks something here can unintentionally commit a breach of contract. This usually ends not only with high costs, but also squanders the trust of external contract partners. With contract management software, contract conditions can be represented and the entire contract lifecycle can be tracked.

Internal and external contracts: What's the difference?

There are no blanket differences between internal and external contracts. Both can be quite complex. They usually include regulations on contract term, authorities, responsibilities and more. The way you proceed when setting up an internal or external contract is essentially the same.

Setting up a contract - How does it work?

Are you wondering whether you can just start typing in Word or should entrust the creation of contract to lawyers? This topic requires a bit of caution. Spoiler alert: There are good middle grounds, somewhere between Word and expensive lawyers, with which you can create legally compliant contracts.

Fact is, if someone gets presented an obviously unprofessionally created contract, they would question the seriousness of their counterpart. Therefore, not only the content but also the appearance and the lack of errors play a decisive role when setting up a contract.

The foundation of professional and legally compliant contracts: How to set up contracts

Step 1: Structure and layout

"Simple and professional" is the motto. Build your contract in a simple and understandable way. Make sure not to get involved in too many levels - make it as easy as possible for your readers to understand legal texts. This way, your contract partners can quickly review and sign the contract.

Step 2: Headings

Contracts contain several clauses. Use appropriate headings for the individual paragraphs. They tell your contract partners right away what information they can find in which paragraph of the contract.

Step 3: Formatting and design

Of course, you shouldn't necessarily choose a font like Mistral - you've probably already figured that out. Meaningful paragraphs shouldn't be too short either. Each of your formatting decisions should pursue the same goal: good readability. Choose a clean design that matches your corporate identity. We especially recommend not changing your design weekly and in any case not to change formatting within a document. Keep it simple and consistent. This increases your brand recognition and simplifies contract creation.

Contract management tools ensure a good readability, a customized and consistent design for all your contracts.

Step 4: Media

A contract has to be complicated and dry? No, not at all! Graphics such as flowcharts can help you to clearly illustrate complex processes and hierarchies. So use media whenever they contribute to better understanding.

Step 5: Complex clauses

Always put yourself in your counterpart's shoes. They don't necessarily have to be legal experts. If complex clauses are included in your contracts, then go into more detail. Explain these in the simplest words you can find.

Some contract creators refer to legal texts or use abbreviations. That's well-intentioned, but it's precisely this that can lead to delays in contract conclusion. If your contract partners can't directly understand or trace text passages in your contracts, they set them aside or pass them on to a specialist department for review. That takes time.

There are contract management software that enable more than comment functions to explain possible unfamiliar terms and clauses. For example, video explanations can be added.

Contents of a contract - How can you set up a purchase contract?

Source: freightos.com

In principle, it is possible to set up a purchase contract yourself. But you should be aware that a defective or incomplete purchase contract has legal consequences. It is therefore advisable to resort to legal help or specially developed software.

Setting up a contract: What should it include?

Mandatory and optional components

Purchase contracts must at least include the item of purchase, the price, the buyer and the seller.

You can write a contract without defining every detail right away. It's enough if payment and delivery conditions are agreed upon in a separate meeting at a later date.

International contracts

In international business, the "Incoterms" are useful as they speak a uniform language across countries. Incoterms are internationally valid and regulate the distribution of costs, the distribution of risk, and the due diligence obligations between the contract partners.

Additional documents

With a contract, a whole series of documents, such as shipping documents, delivery notes and invoices, usually need to produced that must be processed and filed in compliance with the law. Therefore, a

document management

can be particularly useful.Data protection and contract managementSensitive contract information must always be stored in compliance with data protection regulations. When drafting a contract, you should also pay attention to many other things. An ISO 27001 certified software solution ensures that you comply with legal requirements. For example, it provides end-to-end encryption, access via two-factor authentication, and hosting on German servers.

If your company has a lot of work with data protection issues, it may be worthwhile to delegate the audit effort to a responsible person and get advice from professionals in

privacy tech.

Creating a contract in 7 steps: What does it need to include and how should you proceed?1. Name the contract parties exactly

First, you have to name the parties exactly. Make sure to provide the correct company names and legal forms. The liability conditions of a GmbH, for example, differ from those of a corporation.

Do not translate legal forms in international contracts. Although GmbH is often translated as "Ltd.", this is incorrect. There are major differences between the American and British translations that should also be considered: the German legal form Gesellschaft mit beschränkter Haftung (limited liability company) with an explanation in brackets behind the company name (German private limited company - Ltd. (UK) or German limited liability company – Llc. (US)) could be possible. These things make huge legal differences.

2. Create a contract introduction (preamble)

The contract introduction is important in case of disputes and therefore should not be neglected. In this introduction, you should explain the history and the motives for the agreement. Important information about the business relationships and the intentions of the parties must not be forgotten. If disputes arise about the interpretation of different contract components, this information is relevant.

 
3. Use understandable terms and add definitions if necessary

If you use (technical) terms in your contracts, you should add a clear definition for them. Define the terms unambiguously so that any potential for discussion is eliminated.

Each party needs to know exactly what is meant by, for example, "responsible party in connection with the processing of personal data and data protection". Here you could directly adopt the term definition from the EU data protection regulation. It could then roughly sound like this: "The responsible party is the natural or legal person, authority, institution or other body that decides on the purposes and means of processing personal data either alone or in conjunction with others."

An impeccable definition leaves absolutely no room for misunderstandings. This way you can avoid misinterpretations.

4. Determine performance and consideration

The main components of every contract are performance and consideration. You should clearly state the rights and obligations of the parties. Who has to perform when and what (natural or legal) person gets the consideration for it.

5. Establish the consequences of contract violation

Another mandatory part of the contract are the consequences of a contract violation. Both parties have certain rights and obligations. So you should establish which consequences a failure to perform the agreed obligations would have. This is your safety net: Only in this way can you enforce your rights.

6. Add the final provisions

The final provisions come at the end of the contract. These are usually clauses on the place of jurisdiction or possible future contractual changes. In international contracts, it should be stipulated in which country an arbitration procedure would take place should disputes arise. Usually this is one of the countries where the companies are registered.

7. Date and signature

The date and signature are not to be underestimated. The date sets the time from which all rights and obligations arise and the contract comes into effect. It is possible that a different start date for the performances and considerations is determined, but obligations already have validity earlier. If the date is forgotten, this can later have significant legal consequences. If you do not have a signature from your contract partners, you also have no claims.

What exactly does a contract look like?

Source: freightos.com

Contracts can look very different: oral, written or through a reaction or lack of reaction. For example, a contract can be concluded if recipients keep the goods even though they didn't order them. So there is no universal answer to what a contract must look like exactly. Usually it depends on the situation. There are also differences between legal transactions in the B2B and B2C sectors.

The most common types of contracts are:

Purchase contracts

Employment contracts

• Shareholder contracts
• Lease contracts
• Supplier contracts
• Leasing contracts
• Mobile phone contracts
• Maintenance contracts
• Software contracts
• GTCs
• Each of these contract types consists of identical mandatory and different optional components. Mandatory components such as details on the contract parties belong in every contract. In certain cases, such as the purchase of a property or the formation of a GmbH, this requires notarization. Otherwise, the entire contract is invalid.
• Who should create the contracts?

Since important connections and legal consequences are created through contracts, they should be drawn up by specialists. However, the costs for personal legal advice can be high. Alternatively, you can use contract management software, which was developed with legal experts.

Our tips for saving costs when creating a contract

1. If you decide against contract management tools, use free sample contracts from the chambers of commerce

For standard contracts, the chambers of commerce of all countries provide free samples. Here you only have to fill in your data and that of your customers and have signature on the contract afterwards. However, in practice it's quite rare that these sample contracts meet all requirements.

2. Digitized legal services

A solution that offers more flexibility is creating personalized contracts with "modules". It is about digitized lawyer services, which are also called Legal Tech services. On platforms like

PACTA

companies and lawyers meet to set up contracts together and reduce costs by automating legal processes.3. Flat rate Legal Advice PackageA cost-effective and secure solution is the flat rate legal advice package for the creation of basic contracts. This is particularly worth it for terms and conditions and purchase contracts. By creating sample contracts once, you can significantly reduce expenses. You can reuse the sample templates with small adjustments over and over and manage them in a

contract management software.

4. Contract management softwareContract management systems offer a particularly good value for money. On OMR Reviews you find lots of suitable

contract management software

with ratings and user reports. They will help you finding the best solution for your company.Currently particularly popular are:We listed the

best contract management software

ContractHero

Icertis

ContractSafe

Agiloft

EASY Contract

Contractbook

Parashift

Inhubber

for you and compared details like prices!Conclusion: This is the best way to set up a contractThere are numerous types of contracts. They regulate your rights and obligations as well as those of your contract partners. Some contract contents are mandatory, others are chosen freely by the parties. Legal knowledge is quite useful when creating a contract, especially if you're working with Word and Co. However, it is not absolutely necessary. You will have the least work and responsibility if you commission a lawyer, but that requires a not insubstantial budget. Your price-performance winner could thus be a contract management tool. With such a tool, you can create and manage legally compliant, uniform and professional contracts of any kind in a single software.

Fazit: Das ist der beste Weg, um einen Vertrag aufzusetzen

Es gibt zahlreiche Vertrags-Arten. Sie regeln Eure Rechte und Pflichten sowie die Eurer Vertragspartner*innen. Einige Vertragsinhalte sind Pflicht, andere werden von den Parteien frei ausgewählt. Rechtliche Kenntnisse sind beim Erstellen eines Vertrages durchaus sinnvoll, vor allem wenn Ihr mit Word und Co. arbeitet. Unbedingt notwendig sind sie aber nicht. Am wenigsten Arbeit und Verantwortung habt Ihr mit der Beauftragung eines Anwalts, doch das erfordert ein nicht unerhebliches Budget. Euer Preis-Leistungs-Sieger könnte daher ein Vertragsmanagement-Tool sein. Mit diesem erstellt und verwaltet Ihr rechtskonforme, einheitliche und professionelle Verträge jeder Art in einer einzigen Software.