A clear and well-drafted business contract is essential to protect your interests and avoid misunderstandings. Whether you’re working with clients, vendors, or partners, having key clauses in every agreement helps minimize risks. Here are the essential clauses every business contract should include:
1. Parties to the Agreement
This clause identifies all parties involved in the agreement using their full legal names and business details. It avoids confusion about who is responsible for each obligation.
2. Scope of Work or Services
Clearly outline what services or products will be provided. Be specific and detailed so that both parties understand their expectations.
3. Payment Terms
Explain how much will be paid, when payments are due, and how payments will be made. Include any penalties for late payment to avoid disputes.
4. Termination Clause
This section describes how the agreement can be ended. It may include:
- Termination for cause (e.g., breach of contract)
- Termination without cause (with notice period)
- Termination by mutual agreement
5. Confidentiality & Privacy
If sensitive business information is shared, include a confidentiality clause to prevent unauthorized disclosure.
6. Dispute Resolution
Specify how disputes will be handled—whether through mediation, arbitration, or litigation—and which jurisdiction’s laws will apply.
7. Governing Law
Clarify which province, state, or country’s laws will govern the agreement.
8. Force Majeure
Add a clause that frees both parties from liability if unforeseen events (such as natural disasters) prevent them from fulfilling the contract.
Written by Paul Choi, Founder of Sky Law
