Common Mistakes to Avoid in Drafting Contracts

Common Mistakes to Avoid in Drafting Contracts

Contracts are the backbone of commercial relationships, establishing the obligations, rights, and remedies of all parties involved. Whether you're a start-up founder, service provider, vendor, or legal advisor, a well-drafted contract protects your interests and minimizes the risk of disputes. However, poorly drafted contracts can lead to legal ambiguity, financial loss, and protracted litigation.

This article highlights common mistakes in contract drafting and provides practical tips to help individuals and businesses avoid them. Understanding these pitfalls is essential for drafting enforceable, clear, and legally sound agreements.

1. Vague or Ambiguous Language

Mistake: Using unclear or non-specific terms such as “reasonable,” “soon,” or “as necessary.”

Why it matters: Ambiguity invites interpretation. If parties disagree, courts may interpret the contract in a way that harms your position.

How to avoid: Be precise. Instead of saying “delivery as soon as possible,” specify a date: “Delivery by 5 PM on 15th September 2025.” Define all key terms clearly in the definitions section.

2. Failure to Define Key Terms

Mistake: Leaving important terms like "services," "scope," or "payment schedule" undefined.

Why it matters: Without clear definitions, each party might have a different understanding of their obligations, leading to disputes.

How to avoid: Include a definitions section that clarifies all technical or recurring terms. Consistency in terminology is vital.

3. Ignoring Legal Formalities

Mistake: Not complying with mandatory legal elements such as signatures, stamp duty, or notarization.

Why it matters: In India, a contract may be considered void or unenforceable if not duly stamped or signed by the relevant parties.

How to avoid: Consult the Indian Stamp Act or relevant state stamp laws. Ensure execution by authorized signatories, and if required, notarize or register the agreement.

4. One-sided Clauses or Overreaching Terms

Mistake: Drafting overly biased terms favouring one party.

Why it matters: Such contracts may be declared void for unconscionability or become a point of negotiation failure.

How to avoid: Ensure fairness and balance. Consider adding a dispute resolution clause, escalation matrix, or termination option for both parties.

5. Omitting a Dispute Resolution Mechanism

Mistake: Not including arbitration, mediation, or jurisdiction clauses.

Why it matters: In the event of a dispute, parties may face delays and uncertainty about how and where to resolve it.

How to avoid: Always include a dispute resolution clause.

Example: “All disputes arising out of or in connection with this Agreement shall be resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996, with seat of arbitration in New Delhi, India.”

6. Not Addressing Termination Conditions

Mistake: No clarity on when and how the agreement can be terminated.

Why it matters: Without termination terms, you might be stuck in an unfavourable agreement indefinitely or face breach allegations when exiting.

How to avoid: Add clear termination clauses—for breach, insolvency, mutual consent, or specific events. Specify notice periods and consequences.

7. Overlooking Governing Law and Jurisdiction

Mistake: Skipping the governing law clause or choosing a jurisdiction unrelated to either party.

Why it matters: It creates confusion in litigation or arbitration, especially in cross-border contracts.

How to avoid: Clearly state the governing law (e.g., “This Agreement shall be governed by the laws of India”) and jurisdiction (e.g., “Courts at Mumbai shall have exclusive jurisdiction”).

8. No Confidentiality or IP Clauses

Mistake: Not including confidentiality and intellectual property provisions.

Why it matters: Sensitive business information and proprietary content may be misused or leaked.

How to avoid: Include non-disclosure and IP ownership clauses.

Example: “All deliverables created during the term of the contract shall be the sole property of the client.”

9. Failing to Update Standard Templates

Mistake: Reusing outdated templates without reviewing them for relevance.

Why it matters: Legal requirements, business terms, or laws might have changed.

How to avoid: Always customize templates based on the latest legal standards, jurisdiction, and the nature of the transaction.

10. Skipping Legal Review

Mistake: Not having the contract reviewed by a qualified legal professional.

Why it matters: Non-lawyers may overlook enforceability issues, legal compliance, or latent ambiguities.

How to avoid: Before execution, ensure your contract is reviewed by a lawyer familiar with contract law in India or the applicable jurisdiction.

Conclusion

Contract drafting is not merely about recording terms—it is a legal safeguard. A well-drafted agreement ensures clarity, reduces risk, and creates a reliable foundation for long-term relationships. Whether you're engaging in a partnership, employment arrangement, lease, or vendor contract, avoid these common drafting mistakes to protect your rights and avoid unnecessary disputes.

Investing time and effort into proper contract drafting today can prevent years of legal headaches down the road.

FAQs on Drafting Contracts

1. What is the most common mistake in contract drafting?

The most common mistake is using vague or ambiguous language, which leads to confusion and disputes about obligations.

2. Do contracts need to be stamped or registered in India ?

Yes, certain contracts require stamp duty or registration under Indian laws. Failure to comply may make them inadmissible in court.

3. Can I use a free online contract template ?

Templates can help as a base, but they must be customized and legally reviewed to ensure compliance and relevance.

4. Is a verbal agreement enforceable in India ?

While verbal agreements can be valid, proving them is difficult. A written contract offers better legal protection and clarity.