Contracts are much more present in everyday life than you might think. When we think of contracts, lawyers, notary offices, and bureaucracy often come to mind. However, even a simple agreement between siblings, for example, can already be considered a verbal contract.

In addition, not all contracts involve lawyers or need to be signed with pen and paper.

Today, many contracts can be signed and stored online, often without the need for intermediaries.

But before getting into those details, let’s take a closer look at the subject and review the main elements that should appear in a contract, whether you are the contracting party or the contracted party.

What is a Contract?

A contract is a verbal or written agreement between two or more parties, whether individuals or legal entities, created to establish or regulate the performance of something under certain conditions.

For a contract to exist, there must be two or more parties, consent, and a lawful, possible, determined or determinable subject matter. It must also meet the validity requirements applicable to each case.

In Brazil, there are several types of contracts. Some are very common, such as lease, purchase and sale, donation, and lending for use agreements. Others are less common in everyday life, such as risk contracts and technology transfer agreements.

Even so, all contracts are based on fundamental principles and should include certain essential elements.

Some of the main principles that govern contracts are freedom of contract, mutual consent, binding force, and good faith.

How to create a contract and what it should contain

For the principles mentioned above to be reflected in your contract, certain information must be included in the document.

Here are some tips on how to draft your contract and what it should contain, regardless of its type:

Establish and identify the parties

The parties to a contract are the person hiring, meaning the person acquiring the service or asset, and the person being hired, meaning the person who will be paid to provide the service or sell the asset.

Include all relevant information about these parties, whether they are individuals or legal entities. Remember that a company cannot sign a contract on its own. The contract must be signed by an individual who represents the company in that act, as we explain here.

This information usually appears at the beginning of the contract and should include the person’s full name, CPF, the Brazilian individual taxpayer ID, RG, the Brazilian identity document, full address, marital status, profession, and nationality.

If the contract involves a legal entity, you should also include information such as the CNPJ, the Brazilian company tax ID, the full registered office address, and the corporate name.

The information would look like this:

Name, nationality, profession, holder of identity document RG no. XX.XXX.XXX-X, registered with the CPF/MF under no. XXX.XXX.XXX-XX, residing at Street Address, no. XXXX, District, City, State, Postal Code: XXXXX-XX, hereinafter referred to as the CONTRACTING PARTY.

Company Name or Corporate Name, a private legal entity registered with the CNPJ under no. XX.XXX.XXX/XXXX-XX, with registered office at full company address, hereinafter referred to as the CONTRACTED PARTY and hereby represented by name, nationality, marital status, profession, holder of identity document RG no. XX.XXX.XXX-X, registered with the CPF/MF under no. XXX.XXX.XXX-XX, residing at full address of the company representative.

Define the subject matter

The subject matter is the central point of the contract, meaning what the contract is about. In a purchase and sale agreement, it refers to what is being sold. In a service agreement, it refers to the service being provided.

For example, if you provide consulting services, they should be mentioned at this point in the contract. You do not need to describe them in full yet, as you can do that in the following clauses.

See the example below:

The purpose of this agreement is the provision of professional services in insert your area of expertise here by the CONTRACTED PARTY.

Next, specify the subject matter you previously defined. In other words, describe the service or asset and clearly state what it includes and what it does not include. Do not underestimate the importance of defining what is outside the scope.

Be specific and clear to avoid ambiguity, which can be especially problematic in contracts.

Define each party’s obligations

Separate this section into two distinct topics: Obligations of the Contracting Party and Obligations of the Contracted Party.

Under each topic, include clauses specifying the duties, commitments, and responsibilities of each party. The obligations of the Contracting Party may include, for example, providing the necessary information and making payments within the agreed deadlines.

The obligations of the Contracted Party may include performing and delivering the service, defining the number of professionals involved, maintaining confidentiality, supporting the client at certain stages, and providing any equipment or materials required.

Describe everything relevant to your sector and organize each obligation in its own clause, clearly and objectively.

Amounts and payment terms

In this section, define the amounts related to the provision of the service or supply of the asset, as well as the payment method.

If payment will be made in instalments, specify the number of instalments, the amount of each one, and their respective due dates. It is also important to make the payment conditions clear: whether payment must be made before or after delivery, whether it depends on completion of the service, and how and when delivery will be considered completed.

Whenever possible, also specify how payment will be made. If it is by deposit or bank transfer, for example, include the account details where payment should be made. This information can help prove whether the amounts were paid correctly.

Here is an example:

The services covered by this agreement shall be remunerated in the amount of R$ XX.XXX,XX, divided into three payments.
The first shall be paid on XX of XX of XXXX in the amount of R$ X.XXX,XX.
The second shall be paid on XX of XX of XXXX in the amount of R$ X.XXX,XX.
The third shall be paid upon delivery of the project, in the amount of R$ X.XXX,XX.

Deadlines and duration

In this clause, indicate the final deadline for delivering the contracted service or asset. If the project is carried out in stages, also specify the deadlines for each phase.

It is advisable to include a tolerance period for possible delays, as well as the possibility of extending the contract, provided that the conditions for the extension are clearly defined.

Example:

The service that is the subject matter of this agreement must be completed by XX of XX of XXXX.
Failure to meet the deadlines provided for in this agreement releases the other party from the obligation to provide the subsequent service. It does not result in automatic termination of the contract or contractual penalty before the other party has made a statement and before twice the initially agreed period has elapsed.

Breach of contract

In this clause, make clear which situations constitute a breach of contract and what the consequences will be in each case.

For example, specify that non-payment may be considered a breach of contract and may result in contract termination. It is also important to distinguish the consequences of a breach by the Contracting Party and by the Contracted Party, describing each situation in separate clauses as clearly as possible.

In addition, indicate what will happen if payment has already been made or if part of the service or asset has already been delivered. Also define which rights and obligations remain for each party in these situations, especially regarding refunds, continuation of delivery, withholding of payments, or possible compensation.

Termination

During the provision of the service, one of the parties may choose to terminate the contract before it ends. For this reason, this clause should define the conditions under which termination may occur, the procedures to be followed, and whether any penalty will apply.

It is also important to specify what happens if payment has already been made or if part of the service has already been performed. In these cases, indicate whether there will be a refund, proportional payment, withholding of amounts, continuation of any obligation, or other applicable consequences.

Although this clause is similar to the breach of contract clause, it deals with a different situation: termination by decision of one of the parties. Therefore, you can define specific conditions for each scenario, according to the nature of the contract and the interests involved.

Jurisdiction

Jurisdiction is the place where any legal proceedings related to the contract must take place.

When drafting this clause, check whether specific legislation applies to the situation, as it must be respected. In consumer relationships, for example, the competent jurisdiction is usually the consumer’s place of residence, and clauses establishing a different location may be considered null.

Signature

Even a well-drafted contract must be properly signed to provide security and formalize the agreement between the parties. At this stage, Autentique can help: learn how to create an electronic signature in a simple, fast, and secure way.

Precautions

Some precautions can help you avoid future problems.

• Do not accept documents with erasures, gaps, or blank pages;
• Remember to specify the jurisdiction, as this may be a good opportunity to save on legal correspondents and travel;
• Witnesses are not mandatory, but some contracts may require two witnesses to facilitate enforcement or protest;
• Write in language that is easy for both parties to understand;
• Be objective and clear to avoid multiple interpretations;
• Divide the contract clearly and intuitively;
• Use emphasis, such as bold and underlining, with caution;
• Use short sentences and clauses to make the contract easier to understand;
• Always review your contract, especially regarding data, penalties, deadlines, adjustments, and similar points;
• Check whether the contract includes date and place;
• Ask a third person to review the contract.

Common mistakes

Pay attention to the most common mistakes when creating a contract and avoid making them.

• Not checking the legitimacy of the parties, such as lawsuits, defaults, and similar issues;
• Not clearly establishing the assets or services that are the subject matter of the contract;
• Not defining deadlines, amounts, and penalties;
• Poorly defined obligations and rights;
• Not defining clauses for breach or termination of contract;
• Absence of penalties;
• Penalty clauses that are not proportional or that excessively harm only one of the parties;
• Including specific clauses that are already provided for by law;
• Setting contractual penalties that are disproportionate for contracting and contracted parties;
• Establishing abusive clauses or rates different from market rates in the contract;
• Using biased witnesses, such as company employees or relatives of the parties.

If needed, you can add other specific clauses that cover your services or assets.

Now that you know how to create a good contract and what to pay attention to when signing one, see how you can do all of this online.

How to sign a Contract Online

To sign a contract online, you will need a digital document signing platform, such as Autentique.

The process is intuitive and takes less than 40 seconds. See the step-by-step guide:

1. Register with Autentique.
2. Confirm your email.
3. Add the signers.
4. Upload your document.
5. Send it for signature.

You can read more and see full instructions on how to sign digitally here.

Contract template websites

To make this process easier and avoid having to create your contracts from scratch, platforms such as 99 Contratos and Wonder Legal offer several templates that can serve as a basis for drafting your document.

After writing and reviewing your contract, sign it with Autentique. Get started for free!