All businesses require different things, which means your contract needs may vary depending on the location of your business, the industry your business is in, and your business model. However, contracts outline the relationship between your business and its clients, employees, and vendors. Contracts are put in place to protect your business and minimize risk. Here are some of the essential clauses included in business contracts.
Description of Goods or Services
The description of goods or service clause outlines the goods or services that will be provided. This clause must be very specific to eliminate any confusions or questions in the future.
Payment
The payment clause allows you to set your payment terms. It establishes the cost of the good or service, what are the acceptable forms of payment, when payment is due, and any penalties one may accrue.
Dispute Resolution
The dispute resolution clause clarifies how the parties intend to resolve any disputes that may arise from their business contract. Common methods of dispute resolution are arbitration, litigation, mediation, or negotiation.
Governing Law
The governing law clause establishes what state’s law will be used if legal action occurs. This clause allows the parties to be clear on what laws to apply. In the event of litigation courts will often respect this clause and use that law in the litigation.
Termination
The termination clause defines how the parties can terminate their agreement if something goes wrong, and when the parties can terminate their agreement. Usually outlines a specified notice period.
Indemnity
The indemnification clause defines what the indemnifying party will do to compensate the indemnified party for certain expenses and costs. This clause allows both parties to adjust the amount of risk they are willing to accept, protect themselves from lawsuits and damages, and hold the other party accountable in case something goes wrong.
Force Majeure
The force majeure clause relieves a party from any obligation or liability if it becomes impractical, illegal, or impossible to uphold their end of the contract. These could be natural disasters, war, government actions limiting or prohibiting any party from performing it contractual obligations or “acts of God.”
Warranties
The warranties clause protects your business from liability if the other party is dissatisfied with what you’ve given them. This clause minimizes how much the other party can claim if they are dissatisfied with what they receive. Typically, this clause is the “as is” clause. This clause shows that the other party has accepted that they may encounter problems with the goods or service, and they will not act against you if this happens.
Confidentiality Clause
The confidentiality clause, also known as a non-disclosure clause, protects your trade secrets, clients’ confidential information, sales strategies, and anything else that you want to private. This clause is a must in your business contract if the other party will be exposed to confidential information that you want to keep private
Overall, these are a few essential clauses to include in your contract. You should evaluate your business needs and make sure there is a clause within your contracts that will address your needs. Contracts are essential to your business. Although, contracts can be very complex, they allow you to protect your business and clearly outline your business relationship with other parties.
You are already taking the steps in the right direction by reading this article. For more information on setting up your business, protecting your brand, and using the correct contracts, please contact the Law Office of Cathryn D. Gibbs or book a consultation online.
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