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Clauses That Should Be Included in Every Business Contract

For most companies, business operations are far too complicated to rely on handshake agreements. The best way to be sure that all parties understand and agree on all contractual responsibilities is to put everything in writing. The more complex the transaction, the more the need for a comprehensive agreement that controls each party’s obligations and anticipates all possible eventualities.

While contracts are often customized for the particular field of business and for the parties’ needs, there are certain clauses that should be included in most every commercial agreement. Here are some of the most essential ones:

  • Confidentiality — This provision bars the parties from revealing confidential information about each other’s business affairs. The scope of confidential information revealed in a transaction may be extensive. Without a confidentiality clause, a party to a contract might easily get information on the other’s intellectual property, trade secrets or business strategies.
  • Force majeure — This provision excuses the parties from performing obligations in the event of extraordinary or unforeseeable events that are beyond anyone’s control. Examples are severe weather events, natural disasters (wars, riots, acts of terrorism and sudden economic disruptions. A force majeure provision can authorize extensions of time or can also excuse performance completely, effectively canceling the contract.
  • Termination — Many contracts never reach completion. Sometimes one or both parties just decide it would be better to cancel the agreement. The contract should spell out how early termination will be handled. A termination clause should identify acceptable reasons for ending the agreement as well as the procedures to be followed and the financial terms that will apply.
  • Jurisdiction and choice of Law — It is very common for businesses to operate from different states or countries. The contract should specify which courts will have jurisdiction over any litigation that arises concerning the contract. Also, the contract should specify which state or national laws will govern interpretations of each party’s rights and obligations under the contract.
  • Alternative dispute resolution — Contract disputes can usually be resolved out of court. The parties should include a clause requiring some form of alternative dispute resolution (ADR) when conflicts arise. ADR is usually much less expensive and faster than trying to resolve matters in the courts. Options include mediation, arbitration and neutral evaluation.
  • Contract changes — Contracts often have to be modified, especially in the course of complex or long-term arrangements. Many disputes arise when there is no set procedure for amending the contract. The contract should have a clause specifying how and under what circumstances modifications can be made.

When you’re entering into a commercial contract, an experienced Florida commercial lawyer can be an indispensable aide in drafting or reviewing its provisions to make sure the agreement best serves your needs and objectives.

H. Clay Parker, Esq. in Orlando is one of Florida’s premier business and commercial litigation law firms. Feel free to contact us online or call 407-216-2504 for a consultation.

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