Beruflich Dokumente
Kultur Dokumente
By: LawInfo
http://resources.lawinfo.com/business-law/common-contract-terms-explained.html
In every contract there are invariably a slew of legal terms and conditions that,
regardless of the contracts purpose, go unchanged and often unchecked by the
contracting parties. These terms and conditions are often referred to as the contracts
boilerplate language. Most people dont give these sections a second thought, and its
typically a non-issue. That is, until they have a dispute and the contract is used as
evidence in court. Since these terms can influence the outcome of a lawsuit, its worth
knowing at least their general meaning, and whether they can be negotiated in your
favor.
Indemnification (Hold harmless agreement)
If you agree to an indemnification clause it means you are agreeing to hold another
party harmless against future legal claims. Its easiest to understand indemnification
through an example: say you rent a car and sign a contract with the rental agency that
you will indemnify them against any future claims. If you were to get into a car accident
where another party was injured, they would not be able to sue the rental agency
because you have indemnified them against all future claims. If the other party
attempted to sue the rental agency, you would be legally obligated to assist in the
agencys legal defense.
Indemnification is a way for people to protect themselves from being financially liable for
anothers actions or negligence. These clauses are usually written with great care and
precision so it is important to understand the limitations and scope of the indemnity
before signing a contract.
Sample indemnification clause:
Widgets, Inc. agrees to indemnify and hold harmless Corp. X against loss or threatened
loss or expense by reason of the liability or potential liability of Corp. X for or arising out
of any claims for damages.
Time is of the essence
A time is of the essence clause is included in a contract to signal that any delay in
performance will amount to a material breach of the agreement. For example, a landlord
may insist a remodel of a condo be completed by a certain date because tenants will be
moving in shortly thereafter. If the remodel isnt completed by that date, the
consequences for the landlord would be significant in terms of lost rent. Without a time
is of the essence clause, a delay might be considered a material breach and the
landlord may not be able to successfully sue the contractor for the breach.
In some cases, contracting parties will explicitly agree that time is not of the essence.
This is particularly true when there are unknown variables that could influence a
persons ability to perform under the contract within a certain period of time. If the
parties want to make it clear that a delay in performance is acceptable they should
include a time is not of the essence clause.
store the entire balance of $700. If the buyer were unable to make the $700 payment,
he would not only lose the couch, but all the money he had previously paid.
Sample acceleration clause:
In the event of default in the payment of any of the said installments or said interest
when due as herein provided, time being of the essence hereof, the holder of this note
may, without notice or demand, declare the entire principal sum then unpaid
immediately due and payable.
Merger and integration clause (Entire agreement clause)
This clause basically states the entire agreement between the parties has been
completely memorialized in the words of the contract. Thus, if there were ever a dispute
as to the purpose of the contract, or the expected performance of the parties, a judge
would only look to the language of the contract to decide the case. For example, say
you agreed to buy goods from a merchant who would deliver them to you on a certain
date. If a contract for this sale of goods included a merger and integration clause, the
merchant would be precluded from later claiming you had agreed accept the goods on a
different date. The contract language trumps whatever other agreements you may have
had.
There is at least one exception worth knowing. In a dispute over a contract that includes
a merger and acquisition clause a judge may allow in outside evidence in order to clear
up language ambiguities, or to determine whether fraud was committed. However,
outside evidence will not be admitted into court to directly contradict the written
contracts terms. For example, if during the signing of a contract one person thought the
word Soda included fruit juices whereas the other party thought it included only
carbonated beverages, outside evidence may be admissible and useful to clear up the
initial confusion.
When faced with a contract that includes a merger and integration clause, it may be
helpful to have a third party review the contract for ambiguities or missing elements. You
may know what soda means, but without a clearly expressed definition the word is open
to interpretation.
Sample merger and acquisition clause:
This Agreement and exhibits attached hereto constitute the entire agreement between
the contracting parties concerning the subject matter hereof. All prior agreements,
discussions, representations, warranties, and covenants are merged herein. There are
no warranties, representations, covenants, or agreements, express or implied, between
the parties except those expressly set forth in this agreement. This agreement may only
be amended by a written document duly executed by all parties.
As a general rule, all contract terms and conditions are negotiable. If you ever have a
question regarding what something in the contract means, it would be wise to research
its meaning and consequences before signing. Ignorance of the law is not an excuse
that will allow you to break a contract after its signed.