Enforceable contracts are detailed documents. While a sentence and two signatures on a piece of paper are all some types of contracts need to be valid, most attorneys will advise laying out the terms and conditions explicitly in a formal written document, using clauses.
All the provisions for a contract are detailed in clauses: who gets paid, who does the work, and what happens if one party backs out of the contract. Clauses are specific provisions or sections in your contract that address a specific aspect of the agreement. Clauses clearly define each party’s duties, rights, and privileges under the terms of the contract.
There are several different types of clauses, and the ones you use depend on the parties’ needs. One you might use is a choice of venue clause. This lets you choose where the contract will be enforced. If you live in California, but the person you’re entering into a contract with lives in Arizona, you could add a choice of venue clause specifying that you could sue in your county in California if there’s a breach of contract.
Here are some other common contract clauses:
- Statute of limitations clause. This clause gives the parties a time limit for filing a lawsuit if there’s a breach of contract. A statute of limitations clause can’t conflict with any existing law, and many states will not enforce a shorter statute of limitations than what’s already on the books.
- Time of performance clause. Because some matters need to be handled within a particular time frame, a time of performance clause sets out when the contract duties can and can’t be performed.
- Merger clause. This contract clause states that the current contract overrides any previous agreements.
- Indemnification clause. This type of clause releases a party from liability if losses or expenses are incurred. For example, a subcontractor in a construction job may have to sign an indemnification clause stating that, if their work causes damage to the property, the contractor who hired them is indemnified or released from liability relating to the subcontractor’s work.
- Non-waiver clause. This clause protects parties who excuse another party when contract terms aren’t met. As an example, your contract might state that you will charge 5 percent interest on late payments. The other party continually pays their balance late, but you don’t charge them interest for several months. However, a non-waiver clause would allow you to recover the interest charges, even though you accepted the other party making late payments.
- Severability clause. A severability clause states that, even if there’s an invalid clause in the contract, the rest of the contract is enforceable. Without this clause, one invalid provision could void the entire contract.
- Arbitration clause. This states that any disputes must be resolved through arbitration, instead of being brought to court.
- Non-disclosure clause. A clause like this requires one party not to disclose confidential information belonging to the other party. It’s most commonly seen in employment agreements.
- Attorney fees clause. These clauses allow the party that wins in court to require the losing party to pay their attorney fees and sometimes other court fees and costs.
These are just a few types of clauses that can appear in contracts. Some are standard in company agreements, like arbitration clauses and non-disclosure clauses. Others are tailored to specific situations, like the clauses related to the scope of work or goods to be sold and payment information.
No matter what type of clause is in a contract, however, the clause is only enforceable if it doesn’t conflict with existing laws. The statute of limitations clause is a good example of this; courts may be reluctant to enforce a clause that takes rights away from a party.
Because it can be difficult to write contract clauses from scratch, companies like JotForm include boilerplate language in their contract templates that you can adjust to meet your needs. If you’re unsure of the legality of anything in your contract, including clauses, it’s best to consult a licensed attorney in your jurisdiction.
For more information, check out our complete guide on how to write a contract.