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6 Key Clauses Found in Commercial Contracts

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Commercial contracts are needed for any business to operate. This article explores some of the most common clauses found in commercial contracts.

What is a Commercial Contract?

A commercial contract is a legally binding agreement between two or more parties. Mostly, commercial contracts come in the form of written documents, but they can also be verbal agreements in certain situations. They explain, in detail, what all parties are obligated to do for the contract to remain valid, and what the repercussions are should any party fail to comply with the terms and conditions.

Here are six key clauses found in many if not all commercial contracts:

  1. Confidentiality

When businesses enter a contract, there will be a significant exchange of information for both sides to perform their contractually agreed obligations such as each side’s financial and business practices. Therefore, it is imperative for the contract to contain a strongly worded confidentiality clause which should preclude both sides from divulging any information that is shared during the transaction, particularly when there is valuable intellectual property at stake.

  1. Force Majeure

The phrase force majeure literally translates as a “greater force.” This clause can protect parties from circumstances that arise that are beyond anyone’s control. In the event of a natural catastrophe, such as an earthquake, a shipment schedule may be unavoidably disrupted. This clause is important to include to ensure that any failure to perform due to such an unforeseeable disruption is not considered a breach of contract.

  1. Termination Triggers

In business, things often do not occur as planned, and thus parties must be able to cut and run as necessary. For contracts, this usually involves the inclusion of a termination clause. This clause must clearly lay out the circumstances under which one or both parties may terminate the contract, no matter the time left under the agreement.

  1. Jurisdiction

Nowadays, cross-border transactions are routine, both in the domestic and international sense. When the parties to a contract are in more than one country, or state, it may not be clear which laws govern the arrangement. Therefore, commercial contracts should always specify where they will have jurisdiction so that it is perfectly clear which laws are applicable.

  1. Dispute Resolution

Even the most well-drafted contracts are prone to conflict. Thus, it is of the utmost importance to clarify the parties’ plans for dispute resolution if an issue arises. In many contracts, it is common practice to include an arbitration clause, requiring the parties to submit to arbitration prior to or in lieu of seeking a remedy via litigation. This is generally a faster, cheaper way to solve contract-related problems and is recommended.

  1. Damages

Considering the frequency of contract breaches and to deter them, it is also standard practice for commercial contracts to contain clauses related to damages. In general, liquidated damages clauses will be included, which include usually a prearranged amount that will be owed if one side fails to perform. Nonetheless, a court may award other types of damages beyond that amount depending on the nature and impact of the breach.

Regardless of the size of your business or the industry it operates in, it’s imperative that your commercial contracts are carefully drafted, thoroughly reviewed, and closely monitored and managed throughout the contract lifecycle. For help getting started or drafting contract agreements for your business please do not hesitate to contact our specialist team here at Onyx Solicitors on 0121 268 3208 or email us at with your query.

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