Survival Clause in Contract: Everything You Need to Know
A survival clause in contract outlines the provisions and terms that will remain in effect after the contract expires or is terminated.3 min read
A survival clause in contract outlines the provisions and terms that will remain in effect after the contract expires or is terminated.
Survival Clause: Overview
This clause is included in many types of contracts. Some of the most common obligations included in a survival clause include:
- Effect of termination
After meeting the core obligations, a survival clause can include more specific details relating to the individual agreement, including the continuance of certain obligations, warranties, and representations. Alternative forms of language allow for more adaptation to the complexity of survival clauses. When a contract includes alternative language, you can outline the representations, obligations, and warranties in a more general way. If needed, these sections can include enumerated lists that can outlast the contract if it is terminated or expires.
Rather than using a survival clause, an easier way is to include how each clause or section will survive. This is the preferred method for outlining the survival of terms in a contract. For example, in the non-compete clause, you could include a survival section that states the contract terms begin on the effective date and the clause will remain in effect for a certain number of years after the expiration or termination of the agreement.
What's a Survival Term?
A non-disclosure or confidentiality agreement is important when one or both of the involved parties reveal privileged and confidential information when engaging in business together, such as negotiating a merger or making other types of arrangements. These agreements are often found in contracts for employment, existing to protect the trade secrets and intellectual property owned by a company. A survival term outlines the provisions or terms of the contract that remain in effect after the other terms have been met and the contract has been executed.
Since a non-disclosure agreement has a unique and sensitive nature, the terms in a survival clause are often required, not optional. If intellectual property and trade secrets are disclosed for any reason, that privileged information would need to remain confidential even after the relationship between the involved parties has ended. Examples of reasons why intellectual property might be disclosed include:
- Product development
- Other business deals
Maintaining confidentiality is critical because certain information must stay private for a company to continue to survive. Therefore, the survival clauses and terms may be necessary to include in a non-disclosure agreement. A survival clause often outlines the warranties and representations of the seller that will survive the terms of the contract for a set amount of time.
Although the seller's warranties and representations help to create a foundation for the buyer to better understand the business or terms of the deal, the parties may not fully understand which of these warranties and representations will survive the terms of the agreement. Depending on the wording of the contract's survival clause, the interpretations and meanings can vary greatly. Contract laws that apply to that specific contract can also impact how the contract is perceived.
When you're drafting a contract that contains a survival clause, it's important to:
- Have a clear understanding of the intent of the survival clause for both parties
- Ensure that the wording of the clause is legally enforceable under the law and based on the intent of the parties
Example of a Survival Clause
A simple survival clause might start by stating: The following sections will survive the expiration or termination of this contract and remain in effect until fulfilled. It would also include a list of sections that apply to the survival clause, such as:
- Limitation of liability
- Order of precedence
- Choice of forum and laws
When writing any type of survival provision in a contract, make sure to consider what would need to be done after the termination of the agreement. As is evident in the example of the simple survival provision, many of the terms relate to protection against third-party claims, as these remain in effect until after the statute of limitations, and for both parties to get what they expected and were promised.
In the section titled taxes, this protection would reduce the risk of liability if the buyer paid taxes, but the supplier or seller never paid those required taxes. In the payment section, the protection is for the seller or supplier, ensuring that the buyer's responsibility to pay as outlined in the terms will not expire.
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