8 Essential Clauses To Look Out For In A Contract

Here are 8 basic clauses that every business oriented person or individual should look out for when entering into a contract with an entity or a person. Understanding these clauses will lead you to negotiate better contracts that are relevant to your business goals.

  1. Parties – this is the part where you ask yourself, who is the party you are contracting with? In other words, are you entering into the agreement with a legal entity (a company) as opposed to an individual? In addition, you have to check if the person signing the agreement has the authority to do so.
  • Consideration – It is essential for every contract to have a consideration clause. This is where you want to know what you stand to gain from the agreement. Are there any conditions attached to a performance under the contract? And if the contract is for the exchange of goods and services, you want to find out the kind of payment that is accepted.
  • Confidentiality – The confidentiality clause is found mostly in commercial agreements. This is the part of the contract that deals with what information needs to be disclosed. Usually the two sides agree to keep sensitive information among them without divulging it to third parties. In order words, you would like to know whether your most valuable information is being protected.
  • Noncompete and Non-solicitation – In most cases, an agreement will have a non-compete clause and / or non solicitation clause. The non-compete provision is the part that stops a party from competing against the other by using the information gathered from their previous relationship for a period of time.  For instance, if the contract prevents you from working with the other party’s competitors, you have to find out for how long you are not to engage with the other party’s competitors.The non-solicitation clause is the part where you want to know whether the contract prevents you from taking or engaging with employees or customers  of the other side for a period of time.
  • Dispute resolution –  How do you resolve a dispute with the other party in the event of a disagreement?  Do you want to settle disputes through mediation, arbitration or litigation? In negotiating for a contract, be sure to evaluate that the dispute resolution process chosen would best suit your business needs.
  • Termination – This is an important clause commonly found at the end of the contract. This is where you establish what will cause the contract to end. You will want to know at what point in time the agreement will be terminated. In addition, you will want to find out whether you can end the contract if the other party doesn’t fulfill their part or they do something unpredicted. In every venture, things don’t usually go as planned and so in a contract, it is important to have a provision that permits the parties to end the agreement if an unforeseen circumstance occurs.
  • Indemnification – This clause usually transfers risk from one party to another. In negotiating or signing a contract (especially commercial contracts) it is pertinent to recognize who is taking the risk for various actions.
  • Entire Agreement – This provision specifies that the contract is the entire agreement between the parties. This clause usually defines how the contract can be adjusted. This stop a single conversation from changing the foundations of the offer.

These items are to help you be a better negotiator in your next contract. I hope you find this discussion useful to assist you better understand the essential parts of a contract.

Disclaimer : This article does not constitute a legal advice. Please consult a lawyer before taking any legal action including using the discussion in this article.

About the Author

Obiribea Ampofo-Addo is a proud mom of a lovely miracle baby girl. She is originally from Ghana (West Africa) where she was trained and worked as a Lawyer before pursing an LLM in Canada. She currently lives in the United States with her family.
She is a Non- Executive Director of Emerald Community School in Accra, Ghana, where she also volunteers as the school’s Legal Consultant. She is passionate about the promotion and protection of the rights of women, children and persons living with disabilities. She also believes in the equality of all persons, and her dream is to see a world where the fundamental freedoms and rights of all persons are truly respected.
She runs a platform on instagram and Facebook called The Sisterhood of Women (@thesisterhoodofwomen) dedicated to celebrating, empowering and inspiring women from all walks of live. In her  spare time, she enjoys reading, cooking, writing and volunteering with organizations that promote the human rights agenda.

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