5 important clauses to include when drafting business contracts

The terms of a business contract make the parties negotiating accountable to one another. They potentially have the option of taking legal action if necessary to enforce the contract or address any issues.

It is therefore critical to address key matters within a business contract and to include the right protective clauses. Many companies in Texas attempting to establish effective business contracts need to include some or all of the five types of clauses described below for optimal legal protection.

Scope of work clauses

Both parties need to understand the basis of the agreement in the contract. Maybe one party needs to deliver goods and services to the other, or there is an arrangement to complete a project jointly. Discussing everything from timelines to specifications for finished products or projects can help protect both parties from unnecessary conflict.

Liability limitation clauses

In some cases, one party may take on a degree of liability related to the working relationship. For example, employers often have a responsibility to cover injuries that workers incur on the clock. There are various types of liability that can arise in a working relationship, and identifying them in a contract and assigning them to either party is important for the protection of everyone involved.

Severability termination clauses

Contracts often include a vast assortment of different provisions. Typically, there is an expectation that a violation of one aspect of the contract, such as a delay in project completion, should not invalidate the entirety of the agreement. Severability clauses help ensure that the contract remains enforceable even if there are documented deviations from contract terms. Including provisions explaining when either party can cancel the contract and what, if any, penalties apply in such cases can also be important.

Confidentiality clauses

Perhaps a business needs to hire a marketing firm or testing company to prepare for the launch of a new product. Ensuring confidentiality may be critical for the protection of a cutting-edge concept or product before its public announcement. Even if there are no product releases or trade secrets to protect, confidentiality clauses can help protect the reputations of both parties. Limiting the sharing of non-public information is typically beneficial when negotiating business contracts.

Dispute resolution clauses

If conflicts arise during the course of the agreement between the parties, it may become more difficult for them to do business together amicably. Conflict resolution clauses may require sit-down negotiation sessions, mediation or arbitration before either party attempts to litigate. Promoting amicable conflict resolution is a good way to control costs and protect the reputation of both parties.

Having support when drafting and negotiating contracts can help businesses protect their bottom lines and their reputations. The right contract terms can make all the difference for those competing in the modern economy.

Gauntt Koen Binney & Kidd, LLP - GKBK Law

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