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Common Clauses You Should Include In Your Business Contracts

When it comes to business contracts, you want to make sure you dot your “i’s” and cross your “t’s.” Vague or ambiguous agreements can lead to legal headaches down the road when issues arise. That’s why it’s essential to have an experienced attorney draft contracts for your small business. For a contract to be valid, it must include an offer (an action or item that’s exchanged for something of value), consideration (the item of value—typically money), acceptance (a place where both parties accept the terms of the contract), and agreement (a statement that shows both parties agree with the contract and understand the terms). However, there’s much more that goes into business contracts. Learn about the common clauses you should include in your business contracts here. 

Terms and Conditions

Terms and conditions are the basic elements of the contract. This is where you identify the parties, define the scope of work, explain the payment terms, and provide a general overview of what the contract covers. You’ll also want to specify the time the contract will be in place and the terms for terminating the contract. 

Non-Compete

Non-competes can be stand-alone agreements or clauses in new contracts. Non-competes prevent employees from starting a competing business or working for a competitor for a specified timeframe after they leave their current employer. Non-competes also prohibit employees from soliciting clients, patients, or customers from their previous employer. Employers usually include non-compete clauses to safeguard their business interests and assets. These agreements also prevent employees from sharing confidential information about their previous employer. Non-competes must be specific in time, term, industry, and geography. Broad non-competes are challenging to enforce in court. 

Non-Disclosure (Confidentiality)

Non-disclosure agreements (also called NDAs) are contracts that define confidentiality terms between two business entities or employees. NDAs prevent people from releasing confidential material or trade secrets while employed or doing business with a company. NDAs allow companies to share sensitive information with business partners, individuals, and employees with the legal backing that someone cannot share company secrets with competitors or the public. 

Indemnification

Indemnification clauses make another party responsible for paying for any losses, damages, and expenses incurred while defending your business in court if someone sues your company because of the work of a third party. If someone is injured or has property damaged at your business due to the actions of a third party, the indemnification clause frees you from the responsibility of paying for the damages. 

Dispute Resolution 

It’s important to include both informal and formal resolution methods in case of disagreements related to the product or service. Common methods of dispute resolution include evaluation, negotiation, mediation, and arbitration. This section should also specify a reasonable timeframe for resolution before moving forward with the next approach.

Governing Law 

Governing law determines which state’s rules and laws will provide the legal framework for interpreting and enforcing the agreement. This becomes especially important if you enter into a business relationship with a company in another state. Florida will be the governing law if your business is located in Florida.

Force Majeure 

“Force majeure” is a French term that means “greater force.” A force majeure clause in a contract releases both parties from liability or obligation when an exceptional event or circumstance is beyond their control. These events prevent one or both parties from fulfilling the terms of the contract. Force majeure events are typically unforeseeable, unavoidable, and significantly impact the parties’ ability to complete the contract. Examples of force majeure events include natural disasters, hurricanes, war, or terrorism.

Severability

Severability assures that if one part of the contract is considered invalid or unenforceable, the rest of the provisions will remain in effect and be binding.

Amendment or Modification 

You’ll want to outline procedures for amending or modifying the contract terms and conditions. This could include writing an amendment signed by both parties or creating a new contract. 

Peppler Law for Business Contract Creation 

These are just some examples of clauses commonly included in business contracts. Depending on the specific nature of the agreement, along with the business type and industry, additional clauses may be necessary to address the unique circumstances of the business relationship. Contact our Central Florida office to discuss how we can help you develop solid, legally binding business contracts. 

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