What are commercial contracts and their key clauses?

Commercial contracts are agreements that govern business relationships between people or businesses and specify the actions that each party will take or refrain from acting. Commercial agreements are typically verbal, but they can also be in writing. Written contracts are simpler to enforce and give the parties involved guidance on how to fulfil their contractual commitments.Any business that wants to work with vendors, seeks to attract new clients, or is willing to hire staff, must have commercial contracts. In addition to providing advice on how to manage these efficiently during the contracting process, this blog analyses some of the key clauses found in commercial contracts.

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Privacy:

When two or more firms are bound into a contract, there will be a significant exchange of information so that the involved parties have to perform their contractually stipulated obligations. It is essential for the contract to include a clearly crafted confidentiality clause given the requirement to disclose specific information regarding each side’s financial and business activities. Both parties should be prohibited from disclosing any and all information exchanged throughout the course of the transaction. Of course, this is extremely critical when priceless intellectual property is at stake.

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Force majeure:

The phrase “force majeure” means “great force.” This clause is the most vital one when it comes to commercial contracts because it can protect parties from circumstances that arise unexpectedly and beyond their control. For example, in the event of a natural catastrophe, for example, an earthquake, hurricane, or flood, everything can be inevitably disrupted. The term “force majeure” is generally used quite broadly, and many contracts contain verbiage referring to things like terrorist attacks and even acts of God. This clause must be included to guarantee that any failure to perform spurred on by such an unforeseen setback is not viewed as a breach of the contract.

Termination Reasons:

Things rarely go as planned in business, so parties must be able to cut and run as needed. This usually involves the inclusion of a termination clause in the contracts. Regardless of what time is left in the agreement, this section of the contract must explicitly state the conditions under which one or both parties may end it. The opposite party to the contract may reserve the right to end it. For instance, if one of the parties is leased by another entity.

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Authority:

In today’s world, cross-border transactions both domestic and international are frequent for both. It may not be apparent which state’s laws apply to a contract when the parties are located in different states or even other countries. So that it is very obvious that laws are applied, commercial contracts should always identify the state that will have jurisdiction over the deal.

Resolution of Conflicts:

Contract disputes can arise even in the best-written agreements. As a result, it is crucial to lay out the parties’ strategies for resolving disputes in the event that one develops. It is currently standard practise for businesses to add an arbitration clause in many contracts, mandating the parties to submit to arbitration before or instead of seeking redress through litigation. Although certain contracts still allow for traditional legal remedies, this is typically a quicker and more affordable way to resolve contract-related issues.

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There are different stages for contract drafting with contract management software and contract lifecycle management tools. So contracts can be seamlessly drafted. Your commercial contracts must be carefully drafted and extensively evaluated before signing, regardless of the size of your company or the nature of your industry. DocuCollab has industry-leading features that are suitable for enterprises of all sizes, with the best contract management software for small businesses. Click here to learn more.