Contract Terms: Everything You Need to Know
Contract terms usually set out specific rights and obligations of the parties involved and may include several other provisions, such as for payment, deadline, confidentiality, and attorney's fees.4 min read
2. Implied Terms of Contract
3. Business Contract Types
4. Standard Terms for Every Contract
Contract terms usually set out specific rights and obligations of the parties involved and may include several other provisions, such as for payment, deadline, confidentiality, and attorney's fees.
Business Contract Terms
Business contracts are used for completing projects with specific guidelines and outsourcing work to freelancers. A contract ensures timely completion of work as well as proper compensation to workers. It thus safeguards the interests of all the parties to the contract.
A business contract contains a number of terms, some of which are quite common:
- Duties: A business contract sets out specific duties of each party. For example, a contract may require a distributor to try selling the product whereas it may require a manufacturer to reward the distributor for his efforts. A duty may also prohibit a party from doing something. For instance, a contract may prohibit a distributor from hiring a third party for business solicitation.
- Rights: A contract also sets out specific rights of each party. For example, a contract may contain a provision for arbitration in the case of disagreement between the parties with respect to the quality of work or the amount of compensation. Similarly, a contract may grant each party the right to sue the other in certain circumstances.
- Dates: A business contract often states relevant dates, such as the date for completion of a project, date of commencement of employment, and payment due dates.
- Payment: The terms of a business contract usually specify the mode and amount of payment. For example, a contract may provide for making full payment on project completion or payment in installments with the completion of each phase. The terms may also provide for penalty or late fees for a delay in work or interest on late payments.
- Confidentiality: The contracting parties may require and agree to keep the information confidential. For example, a company hiring a writer to prepare promotional material may share confidential business information with the writer. It may require the writer to keep such information confidential, especially not to share it with its competitors.
Implied Terms of Contract
If a term is not expressly stated in a contract but is intended to be included in it, such a term is known as an implied term.
The interpretation of an implied term mostly depends upon how a court views it. In order to avoid uncertainty in business, it's always better to include as many terms as possible in writing.
When it's not feasible to put every minute detail in black and white, you may tell the court that such terms were implied in the contract in order to give it the intended meaning. For example, when you purchase certain goods and services, it is implied that they are merchantable. In other words, you can reasonably expect the goods you are buying to be fit for the intended use.
An implied term is enforceable even though it's not put down in writing or included orally in a contract. In some cases, the intent of the contracting parties makes it necessary to imply certain terms. Even stating something to the contrary in a contract may not nullify certain implied terms.
Business Contract Types
The most common types of business contracts include the following:
- Contracts related to sales, such as warranties and bills of sale
- Contracts related to employment, such as non-disclosure agreements and non-compete agreements
- Leases, joint ventures, and similar agreements
Standard Terms for Every Contract
Following are some of the important provisions you should consider including in a business contract:
- Assignment and Subcontracting: If you would not like the other party to assign or subcontract its obligations to someone else, you should expressly state this in the agreement. Contracts are usually assignable unless they contain a clause to the contrary.
- Attorney's Fees: It's always better to have a clause for payment of attorney's fees and other legal expenses in the case of a dispute. The party against whom the judgment is given should bear such expenses.
- Choice of Law: A business contract should also specify the laws that shall govern the contract. Companies usually designate a state whose law shall be used to interpret a contract. In most cases, the designated state is the one where the principal office of the company is situated.
- Choice of Jurisdiction: Under this clause, the contracting parties agree to settle their claims and disputes arising out of the agreement within the exclusive jurisdiction set out in the contract.
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