{"id":685,"date":"2021-01-08T17:30:53","date_gmt":"2021-01-08T12:00:53","guid":{"rendered":"https:\/\/blogrevv.revv.so\/?p=685"},"modified":"2022-11-25T15:08:05","modified_gmt":"2022-11-25T09:38:05","slug":"critical-contract-clauses-that-you-need-to-know-better","status":"publish","type":"post","link":"https:\/\/www.revv.so\/blog\/critical-contract-clauses-that-you-need-to-know-better\/","title":{"rendered":"Critical Contract Clauses That You Need to Know Better"},"content":{"rendered":"\n

Including the right kind of contract clauses comes with its benefits. It reduces the risks to your company and provides legal rights in case of a dispute. But most of the time, the clauses in a contract are worded differently even if the subject matter of the clauses stays the same. What is more critical than using the wording as presented in the provision of the entire agreement is considering whether these clauses are applicable in the contract that is being signed.<\/p>\n\n\n\n

Let alone contracts, even Santa comes with a ‘Clause!’<\/p>Remove Your Fear of Understanding Contract Clauses<\/a><\/cite><\/blockquote>\n\n\n\n

There is something important before we decide on the business risks present in a contract, what each clause states, and how to remove or reduce these risks by using these clauses. We should understand what are the important components of any business contract. This also helps set clear precedence of contractual obligations for both parties. <\/p>\n\n\n\n

Components of a business contract<\/strong><\/h2>\n\n\n\n
\"These<\/figure>\n\n\n\n

A business contract is exchanged in order to protect the rights of parties under the state law, and to clearly state what obligations each contracting party has. These contracts often specify the period of time, the terms of the contract, and specific provisions. Read this blog to know more about drafting and managing contracts using a contract management software.<\/a><\/p>\n\n\n\n

Here are the seven most important components of a written agreement.<\/p>\n\n\n\n

Including the who\u2019s who of the contract<\/strong><\/h3>\n\n\n\n

These might be pretty basic key terms to be included in all your business contracts and it should answer who all are legally bound to the contract. Whether it is an LLC, a startup, a small business, or an individual contractor bound by the written agreement<\/a>, including this key term helps establish personal liability<\/a>. You can also sue the parties signing the contract \u2013 so this makes a significant difference. In many business contracts, you might also want the parties to have personal guarantees. The key here is to think in terms of who will be responsible in case something does go wrong.<\/p>\n\n\n\n

Representations and Warranties<\/strong><\/h3>\n\n\n\n

This section addresses the underlying facts of your business contract. Representations are essentially the minimum necessary qualifications for a party to provide the services or deliverables covered by the contract. <\/p>\n\n\n\n

For example, if you are the owner of a software application subscription, you represent that your software is compliant with all the major laws and that all requisite software permits and certifications have been obtained when building this software in your service agreement contract. <\/p>\n\n\n\n

However, when it comes to warranties, for example, it is reasonable to expect something from your software partner. Let\u2019s suppose a contract involves custom software development. In that case, it is best to get both parties to work together collaboratively and iteratively to develop such clauses for the solution. These clauses safeguard both of them and provide dispute resolution in case of cancellations, or breaches.<\/p>\n\n\n\n

Payment terms<\/strong><\/h3>\n\n\n\n

Usually, even before the creation of a written contract, the payment terms and the payment methods are decided. It remains one of the major components in all business contracts and must be stated in writing. If your payment terms are complex, it is best to have your accountants or lawyers review them before your contract is finalized. Most types of contract include payment terms.<\/p>\n\n\n\n

Revv Tip<\/strong>:

If you are looking to include payment methods directly into your contract, Revv can help. Revv\u2019s new integration with Stripe<\/a> allows you to integrate payment links directly into the contract.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Term length and grounds of termination<\/strong><\/h3>\n\n\n\n

Is your contract set to expire on a set date? <\/p>\n\n\n\n

Is this dependable on when the deliverables have been received?<\/p>\n\n\n\n

Or, does your business contract renew automatically? <\/p>\n\n\n\n

Depending on the agreement, you might also need to include built-in compensation. Besides the term length, a business contract also needs to include a termination clause that will give the provisions of how to deal with unexpected shutdown of work or closing\/termination of an agreed contract term.<\/p>\n\n\n\n

This component also includes the expiration date, or how much notice period the party needs to provide before it can terminate without a cause.<\/p>\n\n\n\n

Confidentiality and Restrictive Covenants<\/strong><\/h3>\n\n\n\n

If you need to share confidential information with the other party, it is always wise to include a confidentiality and non-disclosure clause. This will prevent any party from misusing proprietary information and help protect your business. Other restrictive covenants include non-compete agreements and non-solicitation provisions. If these are included, it is important to define the remedies if there is a dispute with the breaching party.<\/p>\n\n\n\n

Insurance and Indemnification<\/strong><\/h3>\n\n\n\n

One of the essential objectives of any business contract is to manage risks and protect both parties from an unexpected turn of events such as property damage, personal injury, etc. Therefore, business contracts include an insurance clause that requires parties to maintain defined insurance policies at certain policy limits. The indemnification provision is used to negotiate which party will handle covering the damages or losses under the contract that is not covered by insurance.<\/p>\n\n\n\n

Finding the indemnification clause can often be a daunting task. For example, when looking for the clause, the keywords to search for will be \u2018indemnify,\u2019 \u2018defend,\u2019 or even \u2018hold harmless.\u2019 The other hack is to use Metalens<\/a>, a feature that scans your business contracts and highlights contract clauses that carry risks.<\/p>\n\n\n\n

Want to take the hard work out of drafting contracts? <\/strong>
Try Revv\u2019s contract templates<\/a><\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Boilerplate provisions<\/strong><\/h3>\n\n\n\n

Often referred to as the \u2018Miscellaneous\u2019 provisions at the end of the contract, they appear right at the end of your business contract and cover a wide range of topics.<\/p>\n\n\n\n