Types of contract clauses

The following types of clause are typical in contracts:

An assignment clause permits, prohibits, or restricts a complete transfer of contractual rights by one or more of the contracting parties to a non-party.

A confidentiality clause prohibits or restricts disclosure of specified information (usually related to intellectual property or trade secrets) to non-parties.

A consideration clause sets out what one party undertakes to do or not do in return for the other party’s entry into agreement. It also typically provides the price of the contract or terms of payment.

An entire-agreement clause provides that the contract represents the parties’ entire understanding on the subject matter of the contract. It expressly or impliedly incorporates and consolidates into the contract any oral or prior agreements the parties had reached on the subject matter.

A force majeure clause shields parties from liability for failures to perform contractual obligations when unavoidable events beyond the responsible party’s control have caused the failures. Such unavoidable events include natural disasters and wars, and are sometimes called ‘Acts of God.’

An indemnification or indemnity clause imposes on a party financial responsibility for specified types of claims, damages, or losses. The responsible party undertakes to ‘hold harmless’, ‘indemnify’, or reimburse the other party in the event of any such claims, damages, or losses.

A liquidated-damages clause imposes a fixed financial penalty that a party who breaches the contract or any specified clause must pay to the innocent or injured party.

A severability clause provides that even if some provisions of the contract are declared invalid, unenforceable, or void, the rest of the contract remains in force. Severability clauses are common in agreements with arbitration clauses.

A termination clause sets forth how, when, by whom, and why the contract may be terminated.

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