Contract Document Clause

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A Contract Document Clause is a contract document section with contractual terms (which specify terms, conditions, or obligations applicable to the parties involved).

  • Context:
  • Example(s):
    • Limitation of Liability Clause, which limits the liability of one or more parties for certain types of damages, such as:
      • "NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."
    • Indemnification Clause, which specifies one party's duty to compensate the other for certain losses or damages, such as:
      • "Supplier shall indemnify, defend, and hold harmless Buyer and its affiliates, officers, directors, employees, and agents from and against any and all claims, liabilities, damages, losses, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to any third-party claim alleging: (a) breach by Supplier of any representation, warranty, or obligation under this Agreement; or (b) any negligent act or omission or willful misconduct of Supplier or its personnel in the performance of this Agreement."
    • Intellectual Property Rights Clause, which addresses the ownership and use of intellectual property in the contract, such as:
      • "All intellectual property rights, including copyrights, patents, patent disclosures, and inventions (whether patentable or not), trademarks, service marks, trade secrets, know-how, and other confidential information, trade dress, trade names, logos, corporate names, and domain names, together with all of the goodwill associated therewith, derivative works, and all other rights (collectively, 'Intellectual Property Rights') in and to all documents, work product, and other materials that are delivered to Client under this Agreement or prepared by or on behalf of Provider in the course of performing the Services shall be owned by Client."
    • Confidentiality Clause, which requires parties to keep certain information secret, such as:
      • "Each party agrees to retain in confidence the non-public information and know-how disclosed or made available by the other party pursuant to this Agreement that is either designated as proprietary and/or confidential, or by the nature of the circumstances surrounding disclosure, ought reasonably to be treated as proprietary and/or confidential ('Confidential Information'). Each party shall treat the Confidential Information of the other party with at least the same degree of care as it treats its own confidential information of like kind, but in no event shall it use less than a reasonable degree of care."
    • Termination Clause, which describes how the contract can be ended by the parties, such as:
      • "This Agreement may be terminated: (a) by either party upon thirty (30) days prior written notice to the other party; (b) by either party, effective immediately, if the other party breaches any material term or condition of this Agreement and fails to cure such breach within fifteen (15) days after receipt of written notice of the same; or (c) by either party, effective immediately, if the other party becomes insolvent, files a petition for bankruptcy, or commences or has commenced against it proceedings relating to bankruptcy, receivership, reorganization, or assignment for the benefit of creditors."
    • Force Majeure Clause, which details events outside a party's control that excuse contract performance, such as:
      • "Neither party shall be liable for failure to perform its obligations if such failure is a result of Acts of God, war, or natural disaster."
    • Severability Clause, which is intended to preserve the enforceability of the remaining contract if part is invalidated, such as:
      • "If any provision of this Agreement is found to be invalid, the remainder of the Agreement shall continue in full force and effect."
    • Governing Law Clause, which states which jurisdiction's laws govern the contract, such as:
      • "This Agreement shall be governed by the laws of the State of California."
    • Non-Competition Clause, which limits a party's ability to compete with the other party, such as:
      • "The Employee agrees not to engage in any competing business within a radius of fifty miles for a period of two years following termination."
    • Arbitration Clause, which requires binding arbitration to resolve disputes, such as:
      • "Any disputes arising under this Agreement shall be resolved through binding arbitration in accordance with the rules of the American Arbitration Association."
    • Assignment Clause, which governs a party's ability to transfer rights or duties under the contract, such as:
      • "Neither party may assign this Agreement without the prior written consent of the other party."
    • Warranty Clause, which contains express and implied warranties about goods, services, or information, such as:
      • "The Seller warrants that the goods shall be free from defects in material and workmanship for a period of one year from the date of purchase."
    • …
    • a Contract-Type Specific Clause, such as:
      • Office Lease Agreement Clause (for an office lease agreement), such as a Common Area Use Restriction Clause, or:
        • "The Tenant shall not make any alterations to the premises without the written consent of the Landlord."
      • Software Licensing Agreement Clause (for a software license agreement), like:
        • "Licensor grants Licensee a non-exclusive, non-transferable, revocable license to use the Software solely for Licensee's internal business purposes, subject to the terms and conditions of this Agreement. All rights not expressly granted to Licensee are reserved by Licensor."
      • Service Level Agreement Clause (for a service level agreement), such as:
        • "Provider shall use commercially reasonable efforts to make the Services available 24 hours a day, 7 days a week, except for: (a) planned downtime (of which Provider shall give at least 8 hours' notice via the Services and which Provider shall schedule to the extent practicable during the weekend hours from 6:00 p.m. Friday to 3:00 a.m. Monday Pacific Time), or (b) any unavailability caused by circumstances beyond Provider's reasonable control, including acts of God, acts of government, flood, fire, earthquakes, civil unrest, acts of terror, strikes or other labor problems, or Internet service provider failures or delays."
      • ...
    • …
  • Counter-Example(s):
  • See: Contractual Term, Contract Law, Legal Document, Binding Agreement.

References

2023a

2023b

  • (Bing chat, 2023) ⇒ Bing chat on: What is a "clause" in a contract agreement? (as opposed to an article or a provision)
    • A clause is a specific provision or section in a contract that defines the rights and obligations of the parties. A clause can also be called an article or a provision, depending on the context and the type of contract. There is no definitive rule on how to name the clauses in a contract, but some common practices are:
      • Articles are usually the main sections of a contract that are divided into subsections or paragraphs. Articles are often numbered with Roman numerals (e.g., Article I, Article II, etc.) and have a descriptive title (e.g., Article I: Scope of Work, Article II: Payment Terms, etc.).
      • Clauses are usually the subsections or paragraphs within an article that provide more details or specifications. Clauses are often numbered with Arabic numerals (e.g., 1.1, 1.2, etc.) or letters (e.g., (a), (b), etc.) and may or may not have a title (e.g., 1.1 Definitions, 1.2 Interpretation, etc.).
      • Provisions are usually the individual sentences or phrases within a clause that state a particular right or obligation. Provisions are not numbered or titled, but they may be separated by semicolons or bullet points.
    • For example, a contract may have the following structure:
    • Article I: Scope of Work
      • 1.1 The Contractor shall perform the following services for the Client:
        • (a) Design and develop a website for the Client's business;
        • (b) Provide training and support for the Client on how to use and maintain the website; and
        • (c) Deliver the website to the Client by the agreed deadline.
      • 1.2 The Contractor shall perform the services in accordance with the specifications and requirements set forth in Exhibit A, which is attached to this contract and incorporated by reference.
    • In this example, Article I is the main section that describes the scope of work. 1.1 and 1.2 are the clauses that provide more details on the services and the specifications. (a), (b), and (c) are the provisions that state the specific tasks that the Contractor shall perform.
    • Source: Conversation with Bing, 11/7/2023
      1. Types of Contract Clauses: What is a Clause in a Agreement - PandaDoc. https://www.pandadoc.com/blog/types-of-contract-clauses/.
      2. Contract Clause: What Is It? Examples - Contract Lawyers. https://www.contractscounsel.com/b/contract-clause.
      3. 29 Common Contract Clauses And What They Mean - Incorporated.Zone. https://incorporated.zone/29-common-contract-clauses-and-what-they-mean/.
      4. Common Clauses in a Contract | LegalMatch. https://www.legalmatch.com/law-library/article/common-clauses-in-a-contract.html.

2023c

2023a

  • https://termly.io/legal-dictionary/clause/
    • QUOTE: A clause is a specific point or provision in a law or legal document. It can be an article, section, or standalone paragraph that addresses any topic pertaining to the document that contains it.

2022

  • (Contract Safe, 2022) ⇒ https://contractsafe.com/glossary/contract-clause
    • QUOTE: A contract clause is a specific section or provision in a written contract. Depending on the structure of the contract, a clause may be identified numerically, alphabetically, or by heading. While the term “clause” most often refers to a specific paragraph of the contract, this is not necessarily true. For complicated issues, a clause might consist of multiple paragraphs.
    • Contract Clauses: Purposes Served

      Contract clauses serve several important purposes, including the following:

      • Structure – much like the outline in a textbook, a carefully crafted contract will follow a thoughtful topical structure, which flows with the purposes of the contract and promotes understanding of the contract’s purpose.
      • Assist with Navigation – some business contracts are extremely lengthy. Having an effective table of contents based upon clauses, or clearly marked headings, helps everyone find specific provisions of the contract which are buried deep within the agreement.
      • Ease of Reuse – many common contract provisions in an agreement are “boilerplate,” which means the clause is more or less standardized, or commonly included in contracts. The use of separate clauses within the contract simplifies drafting because some of these previously-used boilerplate clauses can be “plugged-in” to a new contract.
      • Severability – sometimes parties to a contract agree that if one provision fails, the remainder of the contract will be honored. Carefully using clauses helps the parties separate out provisions about which they have concerns.

2021a

  • (Hendrycks et al., 2021) ⇒ Dan Hendrycks, Collin Burns, Anya Chen, and Spencer Ball. (2021). “CUAD: An Expert-annotated Nlp Dataset for Legal Contract Review.” In: arXiv preprint arXiv:2103.06268. doi:10.48550/arXiv.2103.06268
    • QUOTE: ... There are different levels of work in contract review. The lowest level of work in reviewing a contract is to find needles in a haystack. At this level, a lawyer's job is to manually review hundreds of pages of contracts to find the relevant clauses or obligations stipulated in a contract. They must identify whether relevant clauses exist, what they say if they do exist, and keep track of where they are described. They must determine whether the contract is a 3-year contract or a 1-year contract. They must determine the end date of a contract. They must determine whether a clause is, say, an anti-assignment clause or a most favored nation clause. We refer to this type of work as "contract analysis."

      The highest level of work is to assess risk associated with the contract clauses and advise on solutions. At this level, a lawyer's business client relies on them to explain not only what each clause means, but also the implications such a clause has on its business and a transaction. ...

2021b

YYYY

  • .
    • QUOTE: 8.5 A Party may terminate this Agreement for cause (a) upon thirty (30) days’ written notice to the other Party of a material breach if such breach remains uncured at the expiration of such period; or (b) if the other Party becomes the subject of a petition in bankruptcy or any other proceeding relating to insolvency, receivership, liquidation or assignment for the benefit of creditors. If this Agreement is terminated by Us in accordance with this section, You will pay any unpaid fees covering the remainder of the Charges pursuant to all applicable Order Forms. In no event will termination relieve You of Your obligation to pay any fees payable to Us for the period prior to the effective date of termination.
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