Atomic Contract Provision

A Atomic Contract Provision is a contract provision (within a contract document) that represents a single, distinct, indivisible unit of a contract term.

• Context:
  • It can (typically) be contained within an Atomic Contract Clause.
  • It can range from being an Contractual Obligation-based Provision to an Contractual Permission-based Provision to a Declarative Statement Provision.
  • It can range from being a Single-Element Atomic Provision, a Two-Element Atomic Provision, a Many-Element Atomic Provision.
  • It can range from being a General Contract Atomic Provision to being a Contract-Specific Atomic Provision.
  • It can range from being a Unconditional Atomic Contractual Provision to being Conditional Atomic Contractual Provision.
  • It can be referenced by an Contract Issue Spotting Rule.
  • ...
• Example(s):
  • Obligation-based Provisions, such as:
    • Unconditional Obligation Provisions, such as: a monthly rent payment provision requiring the tenant to pay a specified amount of rent each month.
    • Condition-Triggered Obligation Provisions, such as a casualty damage repair provision that is triggered by a casualty event.
  • Permission-based Provisions, such as:
    • Unconditional Permission Provisions, such as a Permitted Use Provision in a software license agreement specifying how the licensee may use the licensed software without any conditions.
    • Conditional Permission Provisions, such as a Sublease Consent Provision permitting the tenant to sublease the property if certain conditions are met, such as obtaining the landlord's prior written consent.
  • Declarative Statement Provisions, such as:
    • a Governing Law Provision stating which jurisdiction's laws will govern the interpretation and enforcement of the contract.
    • an Entire Agreement Provision declaring that the written contract represents the complete and final agreement between the parties.
  • a General Contract Provision, such as:
    • Indemnification Provision, that outlines the circumstances under which one party must indemnify (compensate or secure against legal responsibility) the other, including scope, conditions, and exclusions from the indemnification obligation.
    • Termination Provision details the conditions under which either party may terminate the contract. This includes the notice period required, the acceptable reasons for termination (such as breach of contract, non-performance, or mutual agreement), and any penalties or final settlements involved upon termination.
    • ...
  • a Contract Type-Specific Provision, such as:
    • A Rental Agreement Provision (in a rental agreement), such as:
      • Security Deposit Refund Provision - Rules for returning security deposit.
      • Rental Term Extension Provision - Options for extending rental period.
      • ...
  • an Annotated Atomic Contract Provision.
    • "Contractor agrees that all work product created under this agreement shall be considered a work made for hire_{(IP Ownership Agreement)}¹, with all intellectual property rights owned exclusively by Client_{(IP Rights Allocation)}², and Contractor hereby assigns to Client any and all such rights_{(IP Rights Assignment)}³. Client grants Contractor a limited, non-exclusive license to use the work product solely for the purpose of performing the services under this agreement_{(Limited Use License)}⁴." Intellectual Property Provision, Four-Element Permission Provision.
  • ...
• Counter-Example(s):
  • A Contract Definition Statement, because it does not create any rights, obligations, or conditions on its own.
  • A Severability Clause, because it deals with the contract as a whole rather than a specific term.
  • A Force Majeure Clause, because it is a general principle that applies to all obligations in the contract, rather than a specific, indivisible term.
  • A Legal Statute Subsection, because it forms part of a legislative text.
  • A Company Policy Rule, because it pertains to internal company regulations and not to the specific contractual obligations between parties.
• See: Legal Agreement, Contract Drafting, Contract Management System, Contract Law.

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References

2024

• Claude 3
  • An atomic provision is the smallest, self-contained unit of a legal provision that cannot be further subdivided without losing its meaning or coherence.
    • It represents a single, distinct obligation, right, condition, or statement within a legal document.
    • For example, consider the following provision: "The tenant shall pay rent on the first day of each month and maintain the premises in a clean and orderly condition." This provision can be broken down into two atomic provisions:
      • The tenant shall pay rent on the first day of each month.
      • The tenant shall maintain the premises in a clean and orderly condition.
  • The relationship between atomic provisions and sentence count is many-to-many.
    • This means that a single sentence can contain multiple atomic provisions, and a single atomic provision can span multiple sentences.
    • Here are a few examples to illustrate this relationship:
      • One sentence containing multiple atomic provisions:
        • "The seller shall deliver the goods to the buyer's warehouse, provide an invoice with a detailed description of the items, and ensure that the goods are packaged securely for transport."
        • This single sentence contains three atomic provisions: (a) delivery of goods, (b) providing an invoice, and (c) secure packaging.
      • One atomic provision spanning multiple sentences:
        • "The confidentiality obligations outlined in this agreement shall survive the termination of the contract. The parties agree to maintain the confidentiality of all proprietary information for a period of five years from the date of termination. This includes, but is not limited to, trade secrets, client lists, and financial data."
        • These three sentences collectively form a single atomic provision regarding the survival of confidentiality obligations post-termination.
      • A mix of one-to-one and many-to-many relationships:
        • "The service provider shall maintain adequate insurance coverage during the term of this agreement. The insurance policy must include general liability, professional liability, and workers' compensation. The service provider shall provide proof of insurance to the client upon request."
        • In this example, the first sentence contains a single atomic provision (maintaining insurance coverage), while the second and third sentences together form another atomic provision (types of insurance and proof of coverage).

2023

• Bing chat on: What is a "provision" in a contract agreement? (as opposed to an article or a clause)
  • A provision in a contract agreement is a condition or requirement that must be met by one or more parties to the contract. For example, a provision could state that the seller must deliver the goods by a certain date, or that the buyer must pay a deposit before the contract is effective. A provision can also specify the consequences of breaching the contract, such as penalties, damages, or termination.
  • An article is a larger division of a contract that contains one or more clauses. A clause is a section or subsection of a contract that expresses a specific concept or stipulation. A clause may contain one or more provisions within it. For example, an article could be titled "Payment Terms" and include several clauses that describe how and when the payment will be made, what currency will be used, what interest rate will apply, etc. Each clause may have one or more provisions that detail the conditions or requirements of the payment.
  • Source: Conversation with Bing, 11/7/2023
    1. contract law - What's the difference between a clause, provision .... https://law.stackexchange.com/questions/6324/whats-the-difference-between-a-clause-provision-condition-and-term.
    2. In a contract/an agreement, is there a difference between clause .... https://law.stackexchange.com/questions/73357/in-a-contract-an-agreement-is-there-a-difference-between-clause-article-and-se.
    3. Contract Provision: Meaning, Considerations and FAQs - Investopedia. https://www.investopedia.com/terms/p/provision.asp.

2023

• (Investopedia, 2023) ⇒ https://www.investopedia.com/terms/p/provision.asp
  • QUOTE: A contract provision is a stipulation within a contract, legal document, or a law. A contract provision often requires action by a specific date or within a specified period of time. Contract provisions are intended to protect the interests of one or both parties in a contract.
  • Key Takeaways
    • A contract provision is a stipulation in a contract, legal document, or a law.
    • A contract provision often requires action by a certain date or within a certain period of time.
    • One of the most familiar uses of a contract provision is a bond’s call provision, which refers to a specific date; after this date, the company may recall and retire the bond.
    • A sunset provision is a provision in a regulation stating that sections of the law, or the whole law, expire on a set date.
  • How a Contract Provision Works
    • Contract provisions can be found in a country's laws, in loan documents, and in contract agreements. They also can be found in the fine print accompanying purchases of some stocks.

      For example, an anti-greenmail provision is a type of contract provision that is contained in some companies' charters that prevents the board of directors from paying a premium to a corporate raider to drop a hostile takeover bid.

      In loan documents, a loan loss provision is a type of contract provision that details an expense set aside to allow for uncollected loans or loan payments. This provision is used to cover a number of factors associated with potential loan losses.

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