Contracts are an essential part of most businesses and they come in many different forms. A contract in its most basic form is a legally binding agreement between two or more people. The relevant parties must have legal capacity and the contract itself must contain an offer, acceptance, consideration, and intention to create legal relations. Generally speaking, every contract should contain the following:
The parties must be clearly designated with names and addresses.
Definitions and interpretations
The contract must define and clarify any part of the contract to prevent ambiguity.
Consideration and payment
The contract must show the price of the goods or services and the relevant dates for payment.
Description of the goods/services
A full description of the goods should be provided.
Term of contract
The length of the contract should be clearly indicated and if applicable the possibility of extension of the agreed term.
The specific timescale of the contract should be included and if applicable any deadlines.
Limitation of Liability
It is important to clarify each party’s liability. In some commercial transactions the exclusion of liability is not possible, therefore both parties should agree to limit liability during negotiation.
It is necessary to set out the terms of termination and this must be clearly stated. The notice period should also be stated.
Change of control
In the event that one party’s company changes structure and the other party wishes to terminate the contract, the procedure must be outlined in the contract terms.
In the event of a dispute between the parties, the procedure for resolution should be outlined.
A confidentiality clause should be included to protect any sensitive information connected to the transaction.
Depending on the type of transaction it may be necessary to outline the ownership of any IP on completion of the transaction.
It is common to include warranties in relation to the delivery of the goods/services. This gives the other party a contractual right to sue for damages or loss if there is a breach of warranty.
This is an express obligation to compensate for any damages or loss. It provides an immediate right to compensation which is normally a cash payment.
This clause covers the situations where the contract cannot be satisfied through no fault of the parties.
This clause means that the parties can assign the contractual rights and obligations to another party and can be useful in certain situations.
This clause sets out the legal jurisdiction to which the contract is regulated.
The foregoing is a general list of clauses that may be included and it is important to note that each contract should be tailored to the specific requirements of the transactions.
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