Contracts

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A business contract is a legally binding agreement that outlines the terms and conditions of a transaction between two or more parties. It is a written promise in which one party offers a product or service to another party in exchange for money or any other benefit. This kind of contract includes partnership agreements, employment agreements, independent contracts/service agreements, property and equipment leases, and licensing agreements. Contractual agreements can be for almost anything, as long as the subject is not legally prohibited. Contracts vary depending on the nature and size of the business. There are significant considerations to drafting contracts and crucial clauses to include to ensure effectiveness.

Confidentiality Clause

A confidentiality clause, also referred to as a non-disclosure agreement (NDA), is a contractual provision that prohibits the disclosing party from revealing sensitive information, personally identifiable data, or proprietary knowledge. The terms of the confidentiality clause can be subject to negotiation. However, its primary purpose is to safeguard a company from the unauthorized dissemination of its trade secrets and confidential information.

Non-Compete Clause

A non-compete clause is a contractual term between an employer and a worker. The clause varies based on the profession. While some agreements may restrict employees from working for a competing business consecutively or within a geographic area after employment terminates; other non-compete clauses may limit the kind of service one may provide or the class of clients one may serve. Typically there is a time limit with terms ranging from a few months to several years.

Indemnification Clause

An indemnification clause is an integral part of a business contract that protects one party from the liabilities of the other party. It helps both parties adjust the amount of risk they are willing to accept and holds the other party accountable if something goes wrong. This clause is usually heavily negotiated because of its impact on both parties.

Limitation on Liability Clause

The limitation on liability clause is an agreement between parties that limits the amount one party is obligated to pay the other party for losses resulting from a business contract. It also restricts the types of compensation that one party can recover from the other. This type of clause applies to losses caused by negligence, breach of contract, infringement of intellectual property rights, and misrepresentation.

Dispute Resolution Clause

A dispute resolution clause establishes the framework for resolving any disputes arising from a business contract. Depending on the parties' preferences, it typically includes one or more dispute resolution methods, such as negotiation, mediation, or arbitration. The goal is to reduce costs associated with settling disputes and provide a more efficient and private process.

Crafting an adequately constructed agreement is crucial for ensuring that the clauses stated in the document are legally binding and enforceable. If key clauses are omitted, you and your business could be exposed to costly legal fees, lengthy legal proceedings, and intellectual property theft.

At Plan Life Law, we present industry standards and aspects to consider; assist you with negotiation; provide alternative approaches; prepare and execute agreements that safeguard your interest and minimize potential risks.

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