How to draft legal contracts to protect your rights

What do you know about how legal contracts are drafted in law firms? It's the moment when verbal agreements turn into legally binding obligations that protect your interests.

Imagine that you invested your time and money in a promising project, and trusted a partnership, then were surprised by a dispute that threatened everything you had built simply because one clause in the contract was not carefully worded!

In this guide, we'll discover the smart principles that will transform you from someone who simply signs contracts to someone completely confident in protecting their rights, and you'll learn how to spot loopholes before they drain your finances and wipe out your profits.

Abdulaziz bin Yasser Al-Anzi Law Firm 

The importance of mastering how to draft legal contracts

Why is learning how to draft legal contracts a real investment in your legal and financial security? It is obvious that this major economic transformation that the Kingdom of Saudi Arabia is witnessing is accompanied by an acceleration in the pace of contracts and a diversification in their forms, and therefore, ignorance of how to draft them is a risk with dire consequences.

Legally drafting contracts saves you a lot of time, money and effort, and prevents you from getting caught in a cycle of long and costly legal disputes, and helps you build solid contractual relationships based on clarity and mutual trust.

It is worth noting that familiarity with contract preparation and drafting is not exclusive to lawyers; rather, it is an essential skill that every entrepreneur, manager, investor, and indeed anyone who deals legally with others should possess, in order to control the outcome of their transactions and not leave them at the mercy of chance or the good intentions of others.

Types of legal contracts in Saudi Arabia

The types of contracts used vary according to the economic activities and contractual relationships. Below is a presentation of the most prominent and common of these types:

Company incorporation contracts

These are the contracts that define the legal framework for the relationship between the partners and founders, and include:

• Ownership structure and share ratios.
• Distribution of profits and losses.
• Powers of the Board of Directors and the Executive Management.
• Mechanisms for making crucial decisions.
• Procedures for increasing or decreasing capital.

Partnership contracts

It regulates the relationship between two or more parties involved in a joint project without establishing a formal company, and focuses on:

• Determine the nature of each partner's contribution, whether it is monetary, in kind, or in terms of effort.
• The mechanism for daily management and decision-making.
• Distribution of profits and losses.
• Mechanisms for resolving disputes between partners.
• Conditions for a partner to leave or a new partner to join.
• Liquidation and valuation of the withdrawing partner's share.

Commercial contracts

It includes a wide range of contracts that regulate commercial transactions between establishments, the most important of which are:

• Supply contracts.
• Commercial agency contracts.
• Commercial franchise agreements.
• Consulting service contracts.

Employment contracts

It is subject to the provisions of the Saudi Labor Law, and regulates the relationship between the employer and the employee, and is divided into:

• Fixed-term contracts.
• Open-ended contracts.

These contracts include job title, salary and benefits, working hours, vacations, probation period, termination terms and end-of-service bonus.

Sales and purchase contracts

It is one of the most commonly traded contracts, and is intended to protect the rights of both the seller and the buyer. It includes:

• A detailed description of the item for sale.
• The agreed price and method of payment.
• Delivery terms.
• Guarantee against hidden defects and the consumer's right to replacement or refund.
• Penalties for delay in delivery or refusal to receive.

The fundamental elements of legal contract drafting

It is crucial to first understand the pillars upon which any valid and binding legal agreement is based, without which it loses its legal value, and your efforts in preparing and drafting contracts go to waste:

First pillar: Consent

It is the foundation of any legal agreement, and is defined as the meeting of the wills of the two parties to produce a specific legal effect. Consent must be clearly evident in the text of the contract through clear and unambiguous language, and care must be taken to ensure that the contract expresses a genuine will free from the defects of duress, fraud, or mistake.

The second corner: the shop

It is the obligation that is required to be fulfilled under the contract, and the subject matter must be specified or determinable, existent or possible, and legitimate and not contrary to public order and morals. One of the serious errors in how legal contracts are drafted is neglecting to accurately describe the subject matter, thus opening the door to disputes.

Third pillar: The reason

It is the direct purpose that each party aims for in concluding a legal agreement, and the reason should be legitimate. If it is illegitimate, the contract is void. It is not necessary to state the reason explicitly, but it must exist and be legitimate in all cases.

Essential skills that should be available in writing legal contracts

Drafting legal contracts requires high levels of linguistic and legal skills, the most important of which are:

1. Clarity and precision of expression.
2. Use short, direct sentences.
3. Avoid vague phrases that can be interpreted in more than one way.
4. Comprehensiveness, and considering and addressing all future possibilities and scenarios in the contract terms.
5. Consistency in the use of terminology.

Practical steps for preparing and drafting contracts

Here are the most important practical steps that transform the process of preparing and drafting contracts from a random task into a professional practice, and ensure that you obtain a legally binding document that protects your rights and closes the doors to dispute:

Preparation and planning: Identifying needs and gathering information

Clearly define the purpose of the contract, what you want to achieve, and what the main obligations are for each party. Gather all information relating to the parties, including official names, identification numbers or business records, legal titles, national addresses, as well as the subject of the contract, including the description of the service or product, specifications, value, and duration.

Choosing the appropriate contract structure and defining the key terms

Determine the overall structure of the contract based on the type of legal relationship (sale, partnership, work, supply, etc.), and make sure that the structure covers at least: the parties, the preamble, definitions, the subject of the contract, the obligations of the parties, the financial consideration and method of payment, the duration, guarantees, compensation, confidentiality, force majeure, dispute resolution, termination, and final provisions, so that you avoid forgetting any essential clauses.

Initial drafting and conversion of understandings into binding texts

Begin by writing the contract in precise and clear legal language, avoiding ambiguity and flowery language. Use short, direct sentences, define specialized terms at the beginning of the contract, and be specific when formulating obligations: Who does what? When? Where? How? And by what standards? Never rely on memory or good intentions; every ambiguity in the contract is a potential legal loophole.

Including preventive and strategic items

Strengthen the contract with clauses that protect your interests in worst-case scenarios, including: a pre-defined compensation clause to avoid lengthy disputes over damage assessment, a warranty clause to guarantee quality performance, and a clause...Force majeureTo address unforeseen circumstances, a confidentiality clause is included to protect information, andArbitration clauseOr choosing the competent judiciary to resolve disputes quickly, and other clauses that transform the contract from an ordinary agreement into a strong document.

Internal and external review and audit

Review the contract more than once, read the text aloud to identify any ambiguity, check for consistency in the use of terminology, the accuracy of figures and dates, and ensure there is no contradiction between clauses. Then present the draft to the other party and open a channel for negotiating amendments before adopting the final version.

Legal review and documentation

Contracts of high value or those requiring a special form – such as real estate contracts or corporate contracts – should comply with the legal requirements in the Kingdom of Saudi Arabia, which requires obtaining the advice of a specialized lawyer for final review. Contracts also gain additional strength by being documented with the competent authorities to become an enforceable instrument.

Signing, copying, and managing contracts

All parties must sign the original contract copies, ensuring the dates and signatures match, and an approved electronic signature must be used when contracting remotely, in accordance with the Saudi Electronic Transactions Law.

Distribute the signed copies to the parties, keep the originals in a safe place with a digital backup, create a special record to track renewal or termination dates, and remember that managing active contracts is just as important as drafting them.

The most common mistakes when writing legal contracts

There remain common mistakes that many people make, which weaken the strength of the contract. The most important of these are as follows:

1. Relying on ready-made templates from the internet without adapting them to your specific needs.
2. Ambiguity in wording, and the use of words such as "appropriate," "reasonable," or "as soon as possible" without linking them to an objective standard.
3. Confusing the contract with the agreement, and mistakenly calling the document a "contract agreement" with the absence of the elements of obligation, creates confusion about the legality of the document and its binding force.
4. The omission of a provision for fixed compensation for delay or breach prolongs the dispute and increases the costs of proving damage.
5. Failure to specify the dispute resolution mechanism and jurisdiction, including the omission of mentioning the competent court or the agreed arbitration body.
6. Failure to verify the eligibility and qualifications of the contracting parties.
7. There are formal errors in the dates and amounts, such as the Hijri and Gregorian dates not matching, or the contract value differing between numerals and words.

In the end, he playsAbdulaziz bin Yasser Al-Anzi Law FirmLegal contract writing in Saudi Arabia plays a greater role than simply recording agreements; it gives the contractual relationship its binding force and clarity, and transforms commercial understandings between parties into a legally binding document, based on accuracy and clarity, far removed from any ambiguity or confusion that could open the door to future disputes.

He is carefulAbdulaziz bin Yasser Al-Anzi Law FirmIt also includes essential clauses that protect the rights of all parties, such as clearly defining obligations, implementation mechanisms, and dispute resolution methods, while reviewing the finer details and ensuring their consistency with the legal framework, to minimize legal risks and enhance trust between the contracting parties.

Remember that having a professionally written contract contributes to the stability of business relationships and serves as a legal reference to be consulted when needed, which saves time and effort and prevents parties from entering into complex disputes.

How does it help you?Abdulaziz bin Yasser Al-Anzi Law FirmIn preparing and drafting contracts?

We offer inAbdulaziz bin Yasser Al-Anzi Law FirmWe provide appropriate legal support for the preparation and drafting of all types of legal contracts under Saudi law, focusing on the clarity of the clauses and their freedom from any loopholes that may pose future risks to our clients. Through this support, we aim to protect your rights and ensure balanced obligations, whether it concerns individual contracts or contracts of companies and institutions.

It also includes providing preventative advice to investors and business owners, alerting them to any legislative updates or regulatory amendments that may affect their transactions, so that they can be in constant compliance with the system and prepared in advance for any change that may affect their contracts or business activities.

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