Oral agreements and contracts are enforceable in a court of law. It seems that lawyers are paid by the number of words in a legal contract, but that doesn’t make the document any better. In fact, the more terms there are in a contract, the more things there are for the parties to fight over.

Secret #1 Make sure the agreement is in writing.

Although oral contracts in most states are legal and binding on the parties, there are some areas of the law where the contract must be in writing. Play it safe and put it in writing. A written agreement protects you much better than an oral agreement because it is at least a starting point for analyzing the transaction and the intent of the parties.

Secret #2 Keep it simple.

Lawyers love to include a lot of legal terms like “later,” “so far,” and “previously mentioned” in documents, but in reality, most of the time, this type of legalese contributes little to the contract. Instead, keep the document shorter with clear sentences and numbered paragraphs with headings to break up each new legal concept.

Secret #3 Before you enter into a contract, ask yourself: “Do you trust this person or business entity?” If the answer is “No,” walk away before you run out of money.

If the deal sounds too good to be true, it probably is, so don’t enter into a deal that could cost you thousands of legal dollars down the road.

Secret #4 Identify each party correctly.

I am absolutely amazed at how many legal documents I have reviewed that did not contain the proper parties to the legal contract. The identity of the parties must be clearly indicated. For example, if a business is an LLC, be sure to name the appropriate business entity or person.

If you are not sure of the legal entity of the business, it is best to name one of the parties and leave them out later in the litigation when you identify all the necessary parties. If you forget to name the correct person and break the statute of limitations, you cannot amend a lawsuit once you realize you sued the wrong person or legal entity.

Secret #5 Explain the details of the contract in simple terms.

The body of the agreement should detail the rights and obligations of each individual. If you add a handwritten notation or correction to the agreement, make sure all parties initial the change on the document.

Follow these 5 secrets and you’ll be on your way to saving money with business settlements and legal fees.