Organizing a Written Contract: Parts and Clauses

Parts of a Written Contract: Elements and Clauses

A legally binding written contract should not only meet the requirements or include all of the general elements of an enforceable contract but also follow an established standard for writing and organizing its contents. It is essential to organize these contents into components or parts to foster a logical presentation of the terms and conditions between the involved parties, as well as the scope and limitations of the entire agreement.

What Should Be Included in a Written Contract: Basic Elements and Additional Clauses

The Basic Elements of a Written Contract

A written contract has five fundamental parts. These basic pieces of information collectively indicate the participants or involved parties of the agreement, the details of the mutual agreement, and jurisdictional applicability. Take of the following:

1. Names of the Parties

The generic introductory portion of the document should contain the names of the involved parties and a statement declaring that they are entering into an agreement. Furthermore, these names should be complete and legal, regardless if the involved parties are natural persons or artificial entities such as registered business organizations.

2. Purpose of the Agreement

A sufficient description of the subject matter should be included in the document. For contracts involving the delivery or performances of services, the nature and scope of these services should be described. For the sales of goods, the tangible product should be described in terms of its application, quantity, and other physical characteristics.

3. Description of the Consideration Promised

Remember that two of the elements of an enforceable contract are mutual agreement or meeting of the minds and an exchange of promises or considerations. A written contract should put into detail the promises made by involved parties. These promises collectively form the terms and conditions of the contract, including responsibilities, fees, and termination clauses.

4. Information about Date and Place

The date and place where the contract was made are essential in the enforcement of the agreement. In addition, these information are fundamental in determining the applicability of relevant laws, as well as the chronological and territorial scope in which the contract is both enforceable and legally binding.

5. Signatures of the Parties

Affixing the signatures of the involved parties generally indicates mutual agreement. A written contract is binding and final only if it contains the signatures of the involved parties. Signatures typically represent the handwritten and stylized names of the parties. However, in some jurisdictions, signatures include marks and actions of all sorts that are indicative of identity and intent.

Additional Clauses of a Written Contract

Beyond the five basic elements of a written contract, it should also contain as many details as possible to sufficiently describe the scope, limitations, and nature of the agreement, as well as the rights, responsibilities, duties, and privileges of the involved parties. These details are organized into provisions or clauses. Take note of the following:

1. Special Terms and Conditions

These could include specific promises such as warranties or guarantees relevant to the delivery of services or purchase of goods, as well as an acknowledgment that the receiving party has evaluated the performance of the provider.

2. Integration or Merger Clause

In some scenarios, it is vital to write a specific statement indicating that the current agreement overrides previous agreements through a merger clause. The new contract would render previous terms and conditions obsolete.

3. Statute of Limitations

The document could also include a statute of limitations clause that gives parties a time limit for filing lawsuits or other claims in case of a supposed breach. However, this clause should not be in conflict with existing laws. The time limit should not be shorter than the legally prescribed limits.

4. Choice of Law and Jurisdiction

A clause pertaining to the choice of law specifies in advance which law will be applicable in the event of a dispute. A clause on the choice of jurisdiction states the preferred exclusive jurisdiction or court in which the dispute should be resolve. These clauses are usually included in written contracts in which involved parties operate in two different states or countries.

5. Arbitration Clause:

It is also possible for parties to agree in advance to resolve potential disputes outside the courts. An arbitration clause requires parties to seek assistance from a legally recognized arbitrator to mediate and negotiate any dispute or conflict.

6. Force Majeure

A common clause in contracts is force majeure. It frees involved parties from liabilities or obligations arising from extraordinary circumstances or events beyond their control. Examples include natural disasters and calamities or Acts of God such as storms, earthquake, or volcanic eruption, epidemic or pandemic, and humanmade incidents such as social unrest and war.

7. Indemnification Clause

The contract could also include a clause that shifts liabilities or costs from one party to another. An indemnification clause protects the indemnified party against losses from third party claims related to the contract. The scope of this clause is heavily negotiated because of the risks involved.

8. Severability Clause

Another critical specific component of a written contract is the severability clause. It is essentially a statement that declares enforceability of the entire contract even if there is an invalid or legally unacceptable clause. To understand its importance, note that without this clause, a single invalid clause could void the entire agreement.

9. Confidentiality or Non-Disclosure

It is also essential for parties to promote confidentiality of personal and professional information, including trade secrets and intellectual property rights. A clause on non-disclosure requires parties not to disclose confidential information belonging to one another. It should also describe the extent of non-disclosure. Some cases require writing a separate non-disclosure agreement.

10. Non-Compete and Non-Solicitation

A non-competition clause prevents a party from competing against the other using the information from their prior relationship for some period. It provides another layer of protecting confidential information. A non-solicitation clause prevents explicitly one party to solicit business or any other agreements and dealings from individuals or organizations connected with the other party.

11. Termination Clause

Usually placed at the end of a written contract, the termination clause describes the circumstances under which the parties may end their legal relationship and discontinue their obligations under the agreement. It should contain the time limit of the contractual obligation while also echoing the need to adhere to the terms and conditions detailed in the clauses and the entire components of the contract.

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