Dealing with contracts can be quite tricky. All the complexity and legal ramifications add to the pressure, that’s why it’s important to know the basic clauses found in a commercial contract to ensure that you’re not missing out on any legalities and prevent running into issues.
What are Commercial Contracts?
Commercial contracts are legally binding agreements between you and another party. They generally come in written documents, but in other cases, verbal contracts can be done as well depending on the situation.
These agreements explain what the different parties are obliged to do for the contract to remain valid. In addition, the agreement should also contain repercussions should any party fail to follow the agreed-upon terms and conditions.
With that being said, companies integrate legal contract management software to manage all their business contracts. This is essential to avoid any legal issues and ensure your partnerships, collaborations, and alike remain valid.
But before you jump into creating a commercial contract, it pays to know the different clauses that make an agreement.
Clause #1: Confidentiality
If two or more firms are about to enter a contract, there’s no denying that sensitive information will be shared on both sides to help perform contractual obligations. With that being said, the contract must contain a strong confidentiality clause.
This is needed to ensure that all parties are protected since you’ll be exchanging vital information and valuable intellectual property, which could affect your whole company.
Clause #2: Force Majeure
Force majeure should be included in a commercial contract because it protects parties from circumstances that are out of their control. For example, natural catastrophes and environmental events can disrupt contractual obligations, so you need to be protected with this, or else it may be considered a breach of contract.
Clause #3: Termination Triggers
Things don’t always go as planned, and in some cases, some companies can’t perform or provide what they promised. For this reason, termination clauses are a must so you can clearly lay out the different circumstances where any of the parties can terminate their contract.
Clause #4: Jurisdiction
Another important clause in a commercial contract is the jurisdiction upon which it was created and signed. When parties are located in one or more states, you may be dealing with different state laws and arrangements.
For this reason, ensure that you specify the jurisdiction over the agreement to avoid legal issues. With that being said, contract management is key to ensure that you’re following the right laws, depending on the jurisdiction of each contract that you have.
Clause #5: Dispute Resolution
Unfortunately, even some of the best-drafted contracts can have conflict. With that being said, you must provide a dispute resolution; in any case, a conflict may arise. This is a faster and effective way to deal with contract-related problems without compromising traditional legal recourse.
Clause #6: Damages
Finally, one of the most important clauses in a commercial contract is damages. Essentially, you must include liquidated damages clauses so that both parties are aware of what is at stake if one’s side fails to perform.
The Bottom Line: Commercial Contracts Shouldn’t Be Taken Lightly
Seeing as there are so many factors involved in commercial contracts, you must include all the important clauses to ensure that all parties are protected and are under a fair and solid agreement. Additionally, it’s best to have legal contract management software to ensure that all your contracts are in place to avoid any legal issues and contractual problems in the future.
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