A Summary of Essential Contract Terms – Part 2

Hopefully you have read our blog titled “A Summary of Essential Contract Terms – Part 1.” This blog is a continuation of the questions that should be asked while negotiating and drafting every contract:

How will notices be given?

It is important to require all notices to be given in writing and set forth how they should be delivered (personally, U.S. mail, certified mail, overnight delivery service, etc.). The contract should also specify the address where each party will be served with a notice. You should also identify when the notice shall be deemed to have been received, especially if a certain time period starts upon delivery of the notice.

What is the relationship of the parties?

Depending upon the type of contract, it is important to identify the relationship being established between the parties. For example, is one of the parties an independent contractor or an employee? Does the agreement establish a joint venture, partnership, agency or other association between the parties? Does the contract confer power or authority from one party to the other?

Is the contract severable?

If one portion of the contract is declared by a court to be unenforceable, does the remainder of the contract remain in full force and effect? This type of provision is particularly important in non-compete and non-solicitation agreements.

Can the contract be assigned?

Most contracts specify whether the agreement is binding on and inure to the benefit of the parties and their successors and assigns. As a general rule, however, a contract is only binding on the parties that signed it. However, if a company is sold, you want to ensure that the agreement is binding on the new owners.

Will certain contract clauses survive termination?

When a contract is terminated, it means that it is no longer effective or binding. However, there are certain provisions that you may want to continue to be effective such as confidentiality, indemnification, or limitation of liability clauses.

How can the contract be terminated?

Most contracts provide that they can be terminated “for cause” or “without cause.” This provision should set forth what constitutes cause and the notification requirements, as well as any time period in which the breaching party can cure. If a party is allowed to terminate the contract for convenience, notification requirements should be detailed in the contract.

Does failure to enforce constitute waiver?

Most contracts provide that the failure of either party to strictly enforce the terms or conditions of the contract do not constitute a waiver of such terms or conditions.

Are there any warranties being made?

If warranties are made, they should be clearly identified in the contract. Further, a provision should be included stating that unless expressly stated in the contract, the seller disclaims and makes no other implied or express warranties.

Can the contract be modified?

It is wise to include a clause that states the contract can only be amended or modified in a writing that is signed by both parties.

To learn more about essential contract terms or how we can assist you with other business-related matters, contact Leslie S. Marell today.

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