Contracts help clarify the terms of a business agreement and can protect signatories from future complications. The more that business leaders customize the contracts they sign, the better they protect their organizations.
Different contract inclusions and language can be useful in unique circumstances. The terms included in a vendor agreement are inevitably different than an agreement with a landlord or a new hire. That being said, there are certain types of contract clauses that are often useful in many different types of agreements.
In addition to reviewing the protection needed from the contract and ensuring there is a clear discussion of the agreement between the parties, it may be possible to add other critical terms to the agreement. Those establishing business contracts may want to consider adding the three types of clauses below for optimal organizational protection.
Confidentiality clauses
Unless there is a restrictive covenant, such as a non-disclosure agreement, already attached to the contract, adding a confidentiality clause can be a smart decision. Confidentiality clauses prevent either party from disclosing private information. Confidentiality terms help protect non-public information about companies, including their trade secrets. Preventing the other party from publicly disclosing information about company operations or even the agreement reached can be a smart move.
Severability clauses
Contracts typically include multiple different requirements for each of the parties signing. In some cases, one of the parties might violate an aspect of the agreement. Severability clauses help ensure that the contract as a whole remains enforceable even when minor breaches occur.
Alternative dispute resolution clauses
Conflicts may arise between the two parties subject to the contract. Disputes can cause reputation damage and financial harm if they require litigation to resolve. Requiring that the parties sit down for mediation, arbitration or other forms of alternative dispute resolution before litigating can be a smart decision.
There are many other types of clauses, ranging from penalty clauses to force majeure clauses, that can help solidify contractual protections. Each contract requires careful consideration and negotiations to ensure it adequately protects both parties. Discussing the risks related to a contract and the needs of a company with a skilled legal team can help leaders create bespoke business contracts that provide optimal protection. The integration of various unique clauses can enhance contractual protections and limit the likelihood of severe breaches.
