Contract Drafting

Nowadays, considering that financial, professional, and economic relationships in society are expanding and becoming increasingly complex, the proper drafting of contracts has become a crucial and fundamental matter. Therefore, individuals must consult specialists in this field for drafting contracts, as the principles of contract drafting are highly impactful and significantly important in transactions.

Key and Fundamental Conditions for the Principles of Contract Drafting

Essential Conditions for Drafting a Contract According to Article 190 of the Iranian Civil Code

  1. Intention and Mutual Consent of the Parties

    • The intention (will) of the parties reflects their internal agreement and serves as the foundation of the contract. A contract is valid when it is made with the intention to create a binding agreement, accompanied by an outward expression of this intent. This intention must be paired with mutual consent, as consent is a condition for the validity of the contract.
  2. Legal Capacity of the Parties

    • Both parties entering into the contract must possess the legal capacity to engage in transactions. For the parties to be considered legally capable, they must be of legal age (mature), sound mind, and not under any restrictions regarding their ability to act independently (e.g., not under guardianship).
  3. Definite Subject Matter of the Transaction

    • The subject matter of the contract must be clearly specified. This refers to the object of the obligation, which may involve the transfer of goods, provision of services, or a commitment to perform or refrain from a specific action.
  4. Legitimacy of the Purpose of the Transaction

    • The purpose of the transaction refers to the objective that each party envisions before entering the contract. The goal of the transaction must align with legal and ethical standards. It is important to distinguish the legitimacy of the purpose from the legitimacy of the subject matter of the transaction; the two are separate but equally essential conditions.

These conditions are crucial to ensure the enforceability and validity of any contract.

Mentioning the Name of God

In drafting contracts, it is advisable not to begin with the name of God directly. Instead, equivalent terms such as “Bismillah” (In the Name of God) can be used. This practice is rooted in respect and religious beliefs, ensuring that the name of God is not unintentionally disrespected. This approach is based on faith and has no legal implications.


Contract Title

The title of the contract is determined by the intent of the parties. Those drafting the contract must choose an appropriate title that aligns with the structure and purpose in their minds. This prevents confusion in interpreting the contract or applying specific legal regulations. Various criteria can guide the selection of the title, such as the subject of the transaction or the obligations outlined in the contract.


Mentioning the Agreement Formula

Including a specific religious or legal formula for the agreement is optional in contracts.


Title of the Contracting Parties

First, understanding the definition of the contract is essential. Afterward, titles such as “Buyer and Seller,” “Contractor and Contractee,” or “First Party and Second Party” can be used.


Legal Status of the Parties

The legal standing of the parties in the contract must be specified:

  • Personally: The individual directly involved in the transaction.
  • As a Guardian: The legal guardian of one of the parties.
  • As an Attorney: A legal representative acting on behalf of the other party.
  • As a Custodian: A legal custodian, such as a parent or grandparent.

Subject of the Contract

The subject refers to the goods or actions that the parties commit to delivering or performing. The subject is the core of the contract and defines its scope and the level of obligations for both parties.


Contract Value

The monetary amount or assets determined as the consideration in the contract are referred to as the contract value. This value may be termed differently based on the contract type, such as “price” in a sale or “rent” in a lease agreement.


Payment Terms

Defining the payment method is a critical aspect of contract drafting. The agreement should outline how the payment will be made—whether in cash, via check, promissory note, goods, or services. Details such as check numbers, goods or services descriptions, payment methods, exact dates, and penalties for non-payment should be clearly stated.


Timeframe for Fulfillment of Obligations

This refers to the period during which the parties are obligated to fulfill their commitments. Even after the contract period ends, obligations may persist. If the timeframe lapses, the aggrieved party may have the right to terminate the contract or claim damages.


Contract Duration

The contract duration defines its lifespan, after which it terminates unless extended.


Place of Execution

The location for the execution of the contract must be mutually agreed upon and specified.


Secondary Obligations

Secondary obligations are commitments related to the primary obligations of the contract. Although not the main focus, they are crucial. These must be detailed thoroughly, including how they will be performed, associated penalties for delays, and non-fulfillment consequences.


Contract Guarantees

Guarantees ensure compliance with obligations. They can include:

  • Specifying penalties as liquidated damages.
  • Including clauses for contract termination in favor of the aggrieved party.
  • Providing checks, promissory notes, bank guarantees, or collateral.
  • Stipulating joint liability when there are multiple obligors or representatives.

Conditions in the Contract

One of the most significant rights of the parties is including conditions in the contract. These conditions can be tailored to reflect their intentions and objectives.


Force Majeure

Force majeure refers to unforeseen and unavoidable events that make fulfilling contractual obligations impossible. These circumstances are beyond the control of the parties. In such cases, the party affected is not liable for damages or non-fulfillment.


Contract Transfer

This clause allows a third party to replace one of the original contracting parties, transferring all rights and obligations to the new party.


Contract Termination

This refers to conditions under which the legal relationship created by the contract ends. Termination occurs when the contract includes provisions for its dissolution in the event of a breach. This should not be confused with the natural completion of the contract when all obligations are fulfilled.


Dispute Resolution

Given the possibility of disputes, it is advisable to designate a competent authority or arbitrator for resolving conflicts. If no arbitrator is specified, disputes will be handled by the courts.


Reviewing Contract Terms

Contract terms can be revised through amendments, annexes, or supplementary agreements. These revisions must be documented separately and should not alter the original contract’s fundamental structure.


Number of Copies

Specifying the number of contract copies is crucial to avoid confusion during disputes. It is recommended to include this detail in the contract.

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