Eight contract clauses worth reading twice before you sign

A contract is a plan for what happens when things go wrong. The clauses that look like boilerplate are often the ones that decide who wins.

1. The parties

Use full legal names and registration numbers. Check that the person signing has authority to bind the company.

2. The scope and the price

Say exactly what is to be delivered, by when, and for how much. Say whether the price includes VAT and whether it can change.

3. Payment terms

Set the due date, the method, and the consequence of late payment. Vague terms such as "payment on completion" invite argument about when completion happened.

4. Termination

A good termination clause says who may end the contract, for what reason, on how much notice, and what happens next.

Look for rights to terminate for breach and whether a cure period applies.

5. Liability and indemnity

Check any cap on liability and any exclusions. An unlimited indemnity can be far more costly than the contract itself.

6. Governing law and dispute resolution

Name the governing law and the forum. Many commercial parties choose arbitration under the Arbitration Act, 1995, and name the seat, the number of arbitrators and the rules.

7. Force majeure

Define the events that excuse performance and say what each party must do when one occurs.

8. Entire agreement

This clause says the written contract is the whole deal. Anything you were promised in meetings or emails and you want to keep must be in the document.

Formalities

Some contracts must be in writing. For a contract for the disposition of an interest in land, section 3(3) of the Law of Contract Act requires a signed written agreement with the signatures attested by a witness. Always confirm the formalities for your type of contract.

This article is general information. Have an advocate review any contract of importance before you sign it.

Cover photo by Annika Wischnewsky on Unsplash.