If you want to make another person or a corporate body bound by certain terms and conditions, it is preferable to enter into an agreeable contract with them. Drafting a contract or Contract Management Service is not such an easy task. Each contract is different from the other as contracts are customized and drafted in accordance with the needs of the clients. However, there are some clauses that are a must in every contract.

A well-drafted contract is easily understandable whereas badly drafted contracts result in ambiguity and result in wastage of time in understanding the intention of parties. The most crucial factor to consider while drafting contracts is to make them straightforward and easy to understand. A virtuous contract should be free of loopholes and must cover all the important clauses that are vital to the agreement.

From the initiation process to finalizing the contract, it is just a matter of a few key steps. This involves understanding the clauses and their rationale so you’ll be able to negotiate them effectively. Let’s have a look at some clauses you should mandatorily have in every contract.

Confidentiality Clause

This clause is drafted to protect confidential data like business secrets to preventing any disclosures or leaks. As per Indian Law, Confidentiality bounds involved parties to ensure and agree on the specific information that is equipped by one party or all involved parties will remain confidential.

Generally, the best idea is to keep the definition of confidential information as wide as possible. Marking certain documents ‘Confidential’ will help restrict crucial information from getting leaked out. The term ‘confidential’ includes all information shared, mode of sharing whether written, electronic or oral, or any information shared with the third party.

Jurisdiction Clause

This clause in the contract will specify the appropriate jurisdiction that will be applicable to both parties in case a dispute over the contract arises. It determines the particular state whose law would govern the contract. Parties are able to choose their local jurisdiction depending upon the negotiation rounds for the purpose of the lawsuit. 

Dispute Resolution Clause

This clause refers to the mode in which if any dispute takes place between the parties will be resolved. Even the most well-drafted contracts are suspective of conflict. It is common for firms to include Arbitration Clause prior to the litigation process. Arbitration is an out-of-court mechanism. This is a faster and cheaper way to resolve contract-related problems that arise rather than traditional legal recourse.

Limitation of Liability Clause

This Clause specifies the fixed amount that a party will be bound to pay in case of any breach, failure of performing, delay, or any other condition. Limitation of Liability helps a party to assess potential liability and take adequate insurance to cover such risks.

Indemnity Clause

An Indemnity Clause is a mutual transfer of risk between two contractual parties to prevent loss and compensate for the loss which occurs as a result of a specified event. This clause is a tricky yet profitable provision that allows parties to manage the risks, by making one party pay for the loss suffered by the other. Make sure to pay attention while drafting this clause in the contract.

Terms of Payment Clause

A Payment clause is an extremely critical component of all agreements. Whenever drafted a payment clause you should consider the mode of payment, or the payment being made in installment or in advance, also the clear timeline of payment.

Every contract must specify the relevant terms and conditions to avoid uncertainty or increasing risk of misunderstanding which leads to the unnecessary cause of litigation. Learn more about contract management services and solutions visit our website www.aerenlpo.com