Common Contract Clauses

Common contract clauses are found in most any standard contract. Before you sign a contract for your company, it is crucial that you are aware of the different types of clauses there are in contracts and what they mean for your rights within the contract.

What Is a Contract Clause?

Contract clauses are specific provisions or sections found within a contract. Every clause in contracts will address a certain component related to the subject in the agreement. They are targeted at defining the exact rights, privileges and duties that all parties to the contract will have.

A clause can be found in different places in a contract, but they typically are found near the end. Clauses can take different forms and cover virtually any component of the company or business. One commonly used clause is a non-disclosure clause within a contract for employment. This clause provides that employees will not disclose any trade secrets or other confidential information that belongs to the business.

A contract clause is enforceable under state and federal law, along with the remainder of the contract.

“Boilerplate” is a term that is used to refer to standardized language found in contracts. Though they are typically grouped, most boilerplate provisions will not share any common traits with others with the exception that they do not fit in other parts of the contract. They are often found within titles labeled “standard,” “general,” or “miscellaneous.”

Though boilerplate is found deep in the back of a contract, the provisions are quite important. The will have an impact on the resolution of disputes and how courts will enforce a contract. The effect of boilerplate is generally most noticeable when it is left out of a contract.

Common Contract Clauses

Using clauses of different types will be dependent on what the parties to the contract need. Some clauses can appear in a contract more often than others. Boilerplate clauses can appear as a standard in contracts. Parties also have the option of creating topic-specific clauses that appear in contracts with certain clients.

  • Choice of Law Clause: Parties to this clause will agree that the terms of the contract are only interpreted according to the laws of specific states. They can also agree that any litigation only happens in certain jurisdictions. These clauses can only be enforced if they are not in conflict with the requirements of the law. These provisions may not always be enforceable, especially with regard to consumer contracts. However, they will typically be upheld for any contract between a business and a sophisticated party. You should always assume that the provision in a contract will be enforced. You also need to consider how it could affect a dispute, such as the cost and the burden of the litigation.
  • Arbitration Clause: This clause requires that any dispute regarding the contract be resolved via arbitration instead of a lawsuit.
  • Statute of Limitation Clause: This clause will state the frame of time in which lawsuits can occur if there is a breach in the contract. This type of clause will change the statute of limitations that apply to any litigation that is related to the contract. In some cases, especially with consumer transactions, public policy reasons will prevent states from enforcing any statute of limitation reductions. It should always be assumed that, when entering a contract, clauses reducing the statute of limitations will be valid and will commence litigation during the contractual period. It is possible that the court could find the clause invalid, so you must always consult with your attorney before you assume that there is no cause of action based on the contract.
  • Time of Performance Clause: This clause will outline the timeframe in which any duties of the contract can or cannot be performed. It is commonly seen in contracts related to construction, since it is important for any construction work to be resolved quickly, so that the business or homeowner can quickly move forward with little interruption. When timing is crucial, you need to be absolutely sure that you are able to complete your job within the timeframe in the contract. Some other contracts might not specifically state that the timing is of the essence. When this type of language is in a contract, you need to consider why that is so. In some cases, parties to the contract will agree to finish the work in a reasonable amount of time, but not provide a guaranteed deadline. This is used when there are some unknown variables related to the job and the completion date can’t be determined.

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