What is a contract?
When you need to be a party to a contract, whether instigated by you or someone else, there needs to be a lot of money paid out to a lawyer to draw this up. Right?
Wrong. Anyone can draw up a contract. Our culture has accepted the idea that all legal contracts need to be drawn up by a licensed lawyer or paralegal, and incorporate a high level of hard-to-understand legal references, legal lingo and excessive run-on sentences.
Sure, there are many tasks where a specific expert is required. If a person tries to do electrical work themselves rather than hiring a licensed electrician, they could end up dying by electrocution. If a person plays the stock market themselves without any prior experience or knowledge, they could end up losing a lot of money. If the contract is related to the merger of two multi-million dollar international companies, then yes, of course, you will need the assistance of a legal representative because there is a higher level of risk involved. But most contracts are generated to be way more complicated and convoluted than is necessary.
If you wish to draw up a simple contract to clarify a business relationship with another party, is it really worth paying thousands to a lawyer when you could do this task yourself with a little bit of brainstorming and typing?
Essentially, the idea of a contract is a meeting of the minds of the parties involved, with consideration and fairness being given to each. These ideas are then simply written down as evidence of agreement.
To quote the esteemed Judge Milian of the television show 'The People's Court', you just need to grab the nearest roll of toilet paper and a crayon in order to draw this up. There are no rules of what type of paper to use, what colour of pen to use, or how long this needs to be, only that the content needs to be agreed upon by all parties signing it.
So how might a person begin to write up their own contract?
Reference the associated law
Most contracts rely on a related legal statute as their base, or the umbrella of their arrangement. For example, a Landlord-Tenant Lease Agreement is based on the Ontario Residential Tenancies Act (RTA). An Employment Contract is based on the Ontario Employment Standards Act (ESA). Therefore, as long as you have made reference to this statute within your contract, all parties are already legally agreeing to abide by those rules.
For example, the first term that a landlord needs to include in a Landlord-Tenant lease is: "All parties agree that they will abide by the statute and regulations of The Ontario Residential Tenancies Act, 2006, c.17. - Bills 109". This already explains the legal rules that both the landlord and the tenant are expected to abide by regarding their landlord-tenant relationship.
Therefore, all parties involved in a pending contract should ensure to make themselves aware of the terms of the associated Statute prior to signing the contract that makes reference to it. For example, the ESA states that an employee is entitled to two paid weeks of vacation time per year, by law. Therefore, this term does not need to be listed in your employment contract, as it has already been explained within the ESA. If you prefer to be redundant and include some of this information in your written contract anyway as a courtesy to the other party, then you of course may choose to do so.
What other information should be included in a contract?
Follow the 5'W' Questions
WHO: The names and contact information of each party involved.
WHERE: Where will the agreed up activity be located? For example, what is the address of the rental property or the address of business?
WHEN: For how long will the contract last? For a rental property, this could be January 1, 2025, to December 31, 2025. Although you may not have an end date for something like an employment contract, you should still always ensure a start date is recorded.
WHAT / HOW: Each additional term or rule that you would like to include, that has not already been mentioned in the associated statute or needs clarification, should then be listed separately within your contract.
What terms or clauses might be included in a contract?
The terms or clauses of a contract are essentially the rules that all parties agree to follow. For easy reference, each item may be listed in a separate point form or numbered paragraph.
Think about the daily operations of the application of the contract to brainstorm the terms that you may wish to include.
Is there a risk of an employee paying too much attention to their cellphone during work hours? Then write in a specific no cell phone use clause, outlining expectations and ramifications of noncompliance.
Who pays the water bill? Will the landlord be paying all of the utility bills and taking extra money from the tenant to pay for these? Who is in charge of the thermostat? Which side of the driveway should the tenant park on? Outlining specific details in a Landlord-Tenant lease can prevent future miscommunications or misunderstandings.
In general, if you write in a term that is in direct contrast to what is written in the associated legal statute, it would be dismissed should you need to rely on that contract in a legal matter. For example, the RTA states that a tenant cannot be evicted for bringing an animal into their living space. Therefore, if a landlord files an eviction request with the Landlord Tenant Board based on a tenant bringing in a dog that pees on the carpet, then his case will likely be dismissed, regardless if he has a 'no pet' term written into the contract.
There is no need to be excessive
Many contract drafters simply use a template or boilerplate document for all of their agreements. A property management company may use the same landlord-tenant lease agreement for all of their tenants, or a large company may use the same employment agreement regardless of a person's intended position.
For this reason, contracts often include extra information that is irrelevant or unnecessary to the agreement. For example, if a rental property does not have a swimming pool, why is there a clause included about access hours? If someone has been hired to work in the office of a construction business, why is there a clause about them needing to obtain a forklift licence?
The longer and more detailed a contract, the more terms are available to fight over. Therefore, if a topic is not directly related to or required in an agreement, it is better to omit it completely. Again, the governing legal statute is apt to already provide direction of how to handle most topics of potential dispute. As long as this statute is referenced, then those terms are already implied.
If anything, a long, complicated or convoluted contract could be considered as a deliberate trick against a naive party and could provide them with an argument for future legal action. Therefore, the best contract is easy to read and understand, uses plain everyday language and includes only specific information to the agreement.
Can you ask to change a contract being presented to you?
Yes! This is a fact that most people do not seem to understand. As a party to a contract, it is your right to question everything in the paperwork, and request changes or amendments to it. Our society has blindly accepted the current contract execution process. Many large corporate monstrosities deliberately use unnecessary wording, phrasing and terms in their contracts, relying on an opposing party's apathy to not be bothered to read it.
Most people assume that when you are presented with a bully contract from one of these large businesses, you are just expected to sign and date it in order to complete the paperwork and hurry up and get your consideration.
Some common examples of this arrangement are the contracts you may sign when you purchase a new phone and service agreement when you open a new account at a bank, or when you rent out a car.
A one-sided contract, where the non-drafting party has had no direct input and therefore has not necessarily been given fair consideration, should technically be labelled as a waiver.
Regardless, you should always take the time to read over and understand a contract that you are signing. If this means taking it home to take the time to review it thoroughly, and then signing it at a later date, then so be it.
Proper Execution
A contract is executed when all parties involved sign and date the paperwork. Ideally, each page of the contract should also be initialled by each person, so as to acknowledge it has been reviewed. Likewise, any additions or amendments should also be initialled by each party as written acknowledgement. Sometimes a contract will also request a witness sign and date it, who is a person physically watching a party sign the paperwork, to verify it is the correct person named within the paperwork. A witness does not need to read or understand the contract, as their purpose is only to confirm they know the signing party.
The parties need to review the entire contract together, with the drafter or presenter going over each clause one by one, to ensure it is understood. If a person is rushed to sign paperwork without it being carefully reviewed prior to doing this, they may have just cause to take future legal action should they feel it was unfair.
Traditionally, each party should be provided with an original copy of the signed agreement to keep for their records. However, in our new technical world, providing the other parties with an electronic copy of this is sufficient.
Should a breach of any contract item occur, the signed document can then be referenced to prove who broke the agreement. If, for any reason, a contract was not abided by and the written terms or statute cannot clarify how to fix this, then the contract may be considered as frustrated and become void.
What are some common simple contracts that you can draft yourself?
Do you always have to have a written contract for all transactions or relationships? No. Something many people are not aware of is that you are not required by law to have a Landlord-Tenant Lease, an Employment Contract, a Bill of Sale, etc. because there is already a default associated legal statute that lays out the rules.
However, for clarification of expectations and to strengthen communication, it is always a good idea to have a written contract in place so that all parties have something in writing for reference should there be any question of the understood rules.
A general Ontario Landlord Tenant Lease can be drafted using directions from the Residential Tenancy Act (RTA), its governing legal statute. The Ontario Provincial Government has further assisted with these directions by extracting these requirements from the RTA and listing them on their website: www.ontario.ca/page/guide-ontarios-standard-lease.
If you are the owner of a small business, an employment contract is not necessary as long as the proper paperwork has been filed with the government. The payment and receipt of the person's first paycheque proves an employment relationship. However, if an employee signs an employment contract with a business, not only will they be provided with specific company rules, but they are psychologically more likely to feel like they are included and part of a team.
The Employment Standards Act, 2000, SO 2000, c. 41 is the governing statute for employment relationships. Both The Ontario Provincial Government and the Government of Canada provide information and resources to use to help draw up an Employee Contract: www.ontario.ca / www.canada.ca
When you purchase an item from a store, the receipt provided to you is the contract, as it shows details of the transaction. If you sell something on Facebook Marketplace, you could draw up a simple receipt to give to the purchaser with your item to clarify details about it. For example, you may wish to note that the charger was included with the sale of rechargeable headphones or point out an acknowledged scratch on a furniture item.
The Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A is the governing statute for business transactions.
Any written document can be labelled as a contract as long as all signing parties agree to the information, and then sign and date it as acknowledgement. Should any misunderstandings or breaches arise at a future time, it is never a bad idea to have a written contract to prove an agreement, and therefore CYA.
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With over 15 years of experience working in the legal industry, Agent K Private Investigations offers a simple contract drafting service, catering to your specific needs. www.agentkpi.ca
