Entering into a contract: 8 practical tips for clear and strong agreements

1. First, clarify whether the agreement is legally binding

Not every arrangement automatically constitutes an agreement. A legally binding agreement only arises when parties intend to create legal consequences and make that intention known externally. While this sounds logical, it often goes wrong in practice. Emails are exchanged, things are coordinated, scheduled, and even executed, without it always being clear whether the parties are definitively committed to each other.

Precisely for this reason, it's wise to explicitly state at the outset whether you're engaged in non-binding exploration, negotiations, or a binding agreement. The clearer you document this, the smaller the chance of a dispute later on about whether a contract already existed, or merely an intention to continue discussions.

2. Clearly define who the contracting parties are

A surprisingly large number of contract disputes don't start with the content, but with the question: who actually signed or acted? Was it the director personally, the holding company, the operating company, a founder on behalf of the company, or another group entity? If there's ambiguity about this, it can have significant consequences later for enforceability and liability.

Therefore, ensure that the contracting parties are precisely described. Use the full statutory name, registered office, and role of each party. And verify that the person negotiating and signing does so in the correct capacity. A contract is truly robust only when it's clear from the very first page who acquires rights and who assumes obligations.

3. Don't just state that you're collaborating, but specifically what each party must do

The essence of an agreement is that parties make corresponding declarations about a specific legal consequence. In plain language: one party does something, the other can expect something in return, or parties commit to each other reciprocally. Remaining too abstract about this leaves room for discussion.

A good contract therefore specifies as concretely as possible what the performance is, what the counter-performance is, and when obligations are met. Consider the nature of the work, the scope of delivery, the remuneration, the time of performance, and what expectations parties may reasonably have of each other. The more concrete the agreement, the less room for interpretation afterward.

4. Don't blindly trust the contract's title

In practice, a contract is often quickly called a "cooperation agreement," "consultancy agreement," or "co-location agreement," but that title is not legally decisive. For the qualification of an agreement, what ultimately matters is not primarily what parties call their contract, but what rights and obligations they have actually agreed upon and how they implement them in practice.

That's an important warning. Anyone who thinks they can avoid mandatory rules by simply putting a different label on the contract will often find themselves mistaken. If the content and execution of the relationship meet the legal description of a certain type of agreement, then the corresponding rules may still apply. In other words, legal reality takes precedence over the packaging.

5. Pay extra attention to preliminary documents and informal agreements

In commercial processes, term sheets, letters of intent, and other preliminary documents are often used. These can be useful, but also risky. Such documents are not automatically entirely non-binding. Depending on what the parties intended, what they could reasonably expect from each other, and how the text is formulated, legal consequences can indeed arise from them.

Even a gentlemen's agreement is therefore not legally void by definition. The question always remains what the parties intended, what expectations they created, and what circumstances are at play. Anyone working with preliminary agreements is therefore well-advised to indicate very precisely which parts are already binding and which are not. Ambiguity at this stage often has long-lasting effects on the subsequent contract process.

6. Check if your agreement requires a specific form

The starting point is that agreements can generally be concluded without specific formalities. Therefore, a contract doesn't always necessarily have to be cast in an extensive document with signatures to be legally valid. However, this principle has exceptions. For some legal acts, the law does indeed prescribe a certain form, and failure to comply with it can, in principle, lead to nullity.

The practical lesson is simple: don't too quickly assume that "an email is sufficient." First, check if a specific form is required for the type of agreement you're working with. Especially for important transactions or agreements with far-reaching consequences, this is not a mere formality, but a basic check that must be done beforehand.

7. Ensure the contract and practice remain aligned

A contract is not just a document to be signed, but also a framework for collaboration in the months or years that follow. This is precisely where friction often arises. What's on paper might be one thing, while in practice, parties start working differently. And it is precisely this actual implementation that can carry significant legal weight in the interpretation and qualification of the agreement.

That's why periodic review is wise. Does the execution still align with what was originally agreed upon? Is work being done according to the same model, or has the collaboration changed in the meantime? If practices shift, the contract must adapt. Otherwise, there's a risk that parties believe they are operating under one regime, while legally, something different has emerged.

8. Consider more than just the literal text

An agreement does not only have the legal consequences that parties have literally written down. Law, custom, and the principles of reasonableness and fairness can also influence what stems from a contract. This means that a contract is never entirely separate from its legal context.

This makes careful drafting especially important. A good contract is clear, consistent, and balanced. It leaves as little room as possible for future ambiguity, without resorting to unworkable overregulation. It is precisely this combination – clear in text and aligned with practice – that makes a contract legally robust.

Why this is particularly relevant for startups and scale-ups

For startups and scale-ups, contracting is rarely a purely administrative step. In this phase, commercial relationships are built quickly, roles sometimes overlap, and agreements evolve with growth, investments, and product development. It's tempting then to rely on speed, templates, or provisional agreements, yet it is precisely in this dynamic environment that ambiguity regarding content, party position, and qualification can lead to significant risks.

At Startup-Recht, we regularly see that the difference between a smoothly functioning collaboration and a legal problem case starts with the basics: who is bound, to what exactly, under what conditions, and with what legal effect? Good contracts are therefore not a luxury, but an essential part of responsible entrepreneurship.

The most important tip is ultimately simple: take contracts seriously before a dispute arises. Clear agreements, properly documented and aligned with the actual collaboration, provide peace of mind and reduce the chance of unpleasant surprises. If you need help drafting or refining a contract, you can always contact us. We are happy to help with a professional and tailor-made contract that suits your business.

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