Associate Attorney
Well-drafted commercial contracts are an essential element of operating a successful business in North Carolina. Business owners entering into contracts without legal advice may find their rights restricted. Worse yet, the contracts may contain costly mistakes that result in time-consuming, expensive business litigation.
In this blog, our North Carolina business attorneys discuss essential clauses to include when drafting commercial contracts. Using these essential clauses maximizes transparency and minimizes problems.
Essential Clauses for North Carolina Business Contracts
You have standard clauses that should be in every business contract, such as offer, acceptance, consideration, legality, capacity, and awareness. However, other essential clauses to be aware of when drafting and reviewing commercial contracts include:
Confidentiality and Non-Disclosure Agreements
These clauses protect trade secrets and other information you do not want your competitors or the public to discover. The parties to the contract agree not to disclose any confidential information or trade secrets. Depending on the subject matter, a separate Non-Disclosure Agreement may be required.
Force Majeure Clause
Force majeure clauses limit the parties’ liability by removing liability for unexpected and unavoidable events beyond their control. For example, a force majeure clause removes liability for things such as Acts of God (i.e., tornadoes, pandemics, hurricanes, etc.), war, lockdowns, and earthquakes. Without a force majeure clause, the parties would be forced to litigate the matter under common law, which may not remove the liability.
Indemnification Clause
This clause is among the most important clauses to include in a commercial contract. An indemnification clause or “hold harmless” clause shifts potential risks or costs from one party to another party. The indemnifying party agrees to compensate the other party (the indemnified party) for any damages or losses arising from a specific situation.
Termination Clause
The termination clause in a business contract defines how the parties can terminate their agreement. It also establishes specific situations that will automatically terminate the contract.
Dispute Resolution Clause
Parties to a commercial contract can include terms in the contract explaining how disputes between the parties will be resolved. Without a dispute resolution clause, either party could file a lawsuit and take disputes to court.
However, the dispute resolution clause can include an agreement between the parties to use one or more forms of alternative dispute resolution (ADR). Forms of ADR include negotiation, mediation, and arbitration. Read dispute resolution clauses very carefully. They could include mandatory requirements to use ADR, which restricts your legal rights for resolving disputes.
Jurisdiction Clause
Businesses often conduct transactions across state lines and in different countries. When parties are located in different states or countries, it might not be clear which courts have jurisdiction over litigation that might arise. It is essential to include a jurisdiction clause to make it absolutely clear which laws are applicable during disputes or other issues.
Damages Clause
A damages clause defines the amount and type of damages a party is entitled to receive if the other party fails to perform. In many cases, the damages are in the form of monetary awards. A court could award other types of damages depending on the nature and impact of the breach of contract.
Contact Us to Schedule a Consultation With Our North Carolina Business Attorneys
At Patrick, Harper & Dixon, LLP, our experienced business lawyers have an extensive understanding of contract law. We can help you develop commercial contracts that protect you and your company’s best interests and legal rights. Contact us today.
