Which Party Should Prepare the Contract?

In routine commercial transactions, at least one of the parties typically presents a standard-form agreement. But in other situations – perhaps a one-off business relationship, or settlement of a dispute – a new contract must be developed. A question then arises: Which party should prepare the contract?

This is what I tell my clients:

• The advantage of preparing the contract is that you get to tilt the first version in your favor.
• The disadvantage of preparing the contract is that you will pay more in legal fees than if you let the other party prepare it (revising an agreement prepared by the other party takes less time).

In my experience, if one party has significantly greater financial strength and negotiating power, it usually prepares the contract. And if the parties are of roughly comparable stature, the party that cares more about the outcome will prepare the first draft.

Photo credit: iStockphoto

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.