10 Important Clauses That Should be in Any Business Contract
Written contracts are the foundation of most modern commercial relationships. A business contract should be comprehensive. The small details always matter. In negotiating an agreement, it can be easy to overlook some important provisions. Here, our San Diego business law attorney highlights 10 clauses that should be considered as part of every commercial contract.
- Identification of the Parties First and foremost, the parties to the agreement should be clearly identified. The names of individuals/businesses and their contact information must be included within the contract. There should never be ambiguity as to who is subject to the agreement.
- Defined Scope and DurationWell-drafted business contacts have a clearly defined scope and duration. In many cases, disputes arise because parties are not on the same page. A lawyer can help you negotiate a clear and well-defined agreement.
- Reference to the Governing Law The parties should clarify the law that governs the contract. It may not always be California law—particularly if you are doing business with a company or individual from another state.
- An Integration Clause If you have multiple agreements with the same counterparty, it is generally a best practice to consider an integration clause. Simply put, an integration clause in a contract provision that allows some (or all) prior agreements to be merged into the current contract.
- Confidentiality and Non-Solicitation Many business agreements contain confidentiality provisions. This is especially important if proprietary information is being exchanged. Additionally, you may want to consider other restrictive provisions, such as a non-solicitation clause.
- Indemnification and Other Liability Provisions Liability should always be addressed in a business contract. An indemnification clause may be appropriate. As explained by the Cornell Legal Information Institute, indemnity is a legal concept whereby one side of a contract can agree to compensate another for “losses that that party has incurred” as a consequence of certain predefined issues.
- A Termination Clause Commercial agreements do not always last for their originally intended duration. It is generally a best practice to include some type of early termination clause as part of the contract.
- Assignment Provision An assignment provision is a contract clause that allows one party to agree to assign their rights and responsibilities to a third party. California businesses should address assignment rights in their contract.
- Waiver of Remedies and Warranty Through a waiver of remedies and warranty provision, one or both parties to the business contract may agree to voluntarily forgo certain rights. To be enforceable, contract waivers must be reasonably narrow in scope and properly drafted.
- Dispute ResolutionFinally, every business contract should include provisions for dispute resolution. The reality is that disagreements happen. It is best to work out a process for resolving contract disputes before any issues ever arise. It makes resolution more efficient and cost-effective.