Contracts commit your business - and sometimes you, personally - legally, so all contracts should be read thoroughly before signing; that's a given. Having an attorney look over any contracts that affect your business is usually the best plan, but, for many small businesses, keeping a lawyer on retainer isn't in the budget. Our legal subscription plans for small businesses let you run contracts, agreements, and other important documents by your lawyer any time for just one, low, monthly fee. You can learn more at this link, but in the meantime, let's take a look at some common clauses in small business contracts and agreements.

Identities of the Parties

The most basic information included in contracts is details about to whom the contract applies, or the parties involved. There are a few distinctions: is the agreement or contract between individuals? Business entities? A combination of the two? Using your personal name on a business contract instead of your business name might make you personally liable to what would otherwise be your company's contractual obligation.

Rights & Responsibilities

Contracts need to be completely transparent regarding the rights and responsibilities of each party involved. Contracts may allow buyers the right to inspect deliveries before payment, for example. Both sides need to understand what is required of them and what they are risking according to the terms of the contract.

Merger/Integration Clause

A merger/integration clause states that only the full and final clauses agreed to during negotiation are contained in the contract and are the complete and final version. This will prevent disagreements at a later date regarding disputes between any previous version or verbal agreements and the final, written version.

Indemnification Clause

If a party to a contract believes another party to the contract presents some risk of liability through the second party's actions that are out of the first party's control, an indemnification (or indemnity) clause can provide some protection. A retailer who does not want to be held liable for a manufacturer's defective product harming a customer would probably want an indemnity clause included in the contract. The same might be said of the manufacturer who doesn't want to be held liable if the retailer demonstrates their product in a way that it wasn't intended and might be dangerous. Indemnity clauses can be mutual; all scope and duration of indemnity should be negotiated between the parties, and with lawyers, if possible.

Insurance Provisions

Indemnity clauses don't always provide enough protection, so insurance clauses are common, and they cover any losses or damage resulting from mistakes, mishaps, or negligence. Contracts need to clearly state whether one or both parties are to obtain insurance and the amount and type of coverage.

Contract Termination

There are many situations where you may want to end a contract early, and termination clauses build in conditions under which this is possible. Termination clauses usually allow for cancellation either unilaterally or by mutual consent or in the event that one party has defaulted or breached the contract terms. Termination is not the same as not abiding by the contract terms: make sure to meet all your contractual obligations while attempting to terminate a contract.

Dispute Resolution

Most contracts spell out how disputes are handled, specifying time frames and forums, and types of resolution. Legal action is usually an option, but most businesses try to avoid it to minimize distractions from running their business.

Contract Term & Renewal

Avoiding additional commitments can be handled with a contract term clause that specifies the duration of the contract and when/how it can be renewed. Some contracts may renew automatically if we do nothing, so it is always important to read the fine print.

Understanding each contract or agreement you sign is very important, and the expertise of an experienced contract attorney can be invaluable. Members of our legal subscription plans can have even the most confusing and complex documents reviewed and evaluated by an attorney. Learn more about this valuable service, or sign up today!