5 Contract Clauses That You Should NEVER Leave Out of Your Agreement
Have you ever signed a contract without reading it? Or even worse, entered into a contract that wasn’t written? Next time, you find yourself in either predicament, please back away and go watch Judge Judy or the People’s Court. My husband forces me to watch these shows almost every day, and he watches it so much he thinks he’s an attorney. I have to take him down a few notches sometimes, because he tries to get cocky like I’m not the one that spent thousands of dollars and three years in law school, but back to contracts and these judge shows. The parties in these cases are notorious for not having written contracts or not understanding what they are signing, which usually lands them into hot water and they lose their case.
First and foremost, ALWAYS have a written contract. Contracts are one of the most important aspects of your business. Creating and reading contracts will become a very important duty when you are a business owner. The bigger your business gets, you will be using more services and have tons of collaborations (speaking it into existence!). The services and collaborations that you join are going to involve you reviewing contracts or even writing them. Always make sure that your contracts are protecting you and your business. Contracts incorporate several different types of clauses, and depend on the type of services and goods you offer. I want to make sure you understand the clauses listed below and that you are incorporating them into your contracts. These are clauses that will also be in every contract that you read.
1. Parties Involved.
Your contract should identify both parties that are agreeing to enter the contract. This clause is one of the top priorities when you are creating your contract. The parties clause states the person that is legally binded to the contract, and who is obligated to perform the contract. Depending on the other clauses of the contract, if either party breaches the the contract, then the party can sue the person who did not perform their obligation.
Example: This agreement is made on [insert date] (“Effective date”) between [insert Party 1] (“Buyer”) and [ insert Party 2](“Seller”).
2. Services Provided/Sale of Goods.
This clause is one of the most important parts of your contract, and describes the reason that you are entering the contract. Be sure that this clause is specific. If you are a service based company, you will describe what services you are performing. Also add when you will perform these services. If you sell goods, describe the goods you are selling. Be sure to discuss what you are allowing and not allowing when during the services/sale.
Example: [Insert company name] will provide business coaching to Client for 1 hour daily for the next 30 days. [Insert company name] and Client will discuss mindset, building content, marketing strategies, business system workflows, sales tactics, and email list building. Services will not include tax and legal discussions.
Example: Seller agrees to sell, transfer, and deliver to Buyer fifteen green planners for forty dollars each. Seller agrees to deliver the green planners on or before October 31, 2019.
This clause should ALWAYS be in your contract because you want to get the service/good you are paying for. And most importantly, you want the other party to pay you for the service/good you are giving! Consideration is what each party is receiving in exchange for the performance of the service or delivery of the goods. Make sure that the consideration clause includes price, quantity, quality and time of performance.
Example: In consideration of One thousand five hundred dollars, Photographer agrees to perform the wedding photography on April 24, 2018 at the New York City Library.”
Example: Consultant agrees to provide services for one year to Client in exchange for a $500 monthly payment beginning January 1, 2018, and on the 1stof every month ending on December 1, 2018.
4. Governing Law/Choice of Law.
Governing law is the state where the rules and laws apply to interpret the agreement. This will usually be in your home state. But if you have businesses in multiple states, use the state that has the most favorable laws.
Example: This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of [State].
Example: All of the rights and obligations of [company/party] and [other party] arising under or related to this agreement shall be governed by the laws of the State of [state].
5. Entire Agreement.
This clause states that the contract is complete and any prior contract is invalid. Place this at the end of your agreement. If there are multiple contracts or attachments part of the same transaction, include these documents in this clause.
Example: This Agreement represents the entire understanding between the parties and any prior understanding or representation of any kind preceding the date of this Agreement shall not be binding upon either party except to the extent incorporated in this Agreement.
Example: I have read this agreement in its entirety and I agree to and understand the terms and conditions set forth herein. Any prior understanding, representation, terms, or oral agreement of any kind preceding the date of this Agreement shall not be binding upon either party except to the extent incorporated in this Agreement. This agreement may not be amended or modified in any way without the prior written consent of [Party 1] and [Party 2].
Incorporating these clauses into a contract will provide protection to you and your business. Although the above clauses are important, depending on your industry, there are other clauses that you need to include in your contracts. Wilson Murphy Law drafts various contracts for the countless needs of your small business. If you need a specific contract or any other legal services, Wilson Murphy Law is at your fingertips. If you’re unsure what you need, you can contact me using the form below. We can schedule a free 30 minute consultation and we can figure it out together!