Clients who come to us for business contract purposes frequently contemplate the inclusion of the below-listed contract stipulations in their business contracts. These clauses might appear irrelevant to a layperson or a business owner, however, each one of these standard contract specifications serves a significant objective in safeguarding a client’s best interests, as described below:
Merger and Integration Clause
A merger and integration clause is designed to stop the parties that are entered into a contract, from later asserting (typically if a conflict or lawsuit occurs) that the contract does not match their understanding of the agreement, that it was revised by a subsequent or previous oral or written contract, or is inconsistent with some previous agreement. This type of clause typically reads as follows:
“This Agreement and accompanying exhibits attached hereto contain the entire agreement of the parties with respect to the subject matter of this Agreement, and supersede all prior negotiations, agreements, and understandings with respect thereto. This Agreement may only be amended by a written document duly executed by all parties.”
Anybody who is joining a legal contract that involves a merger and integration clause must ensure that all agreements and terms agreed to between both people are expressly incorporated into the written contract. It will likely prove impossible to implement unwritten, verbal agreements. This kind of contract provision, however, is often very helpful in forestalling litigation entirely.
Choice of Law and Forum Clause
Contracts will frequently include wording that indicates that they are to be construed according to the laws of a certain jurisdiction or state. It will also assert that any litigation will take place within a particular, pre-specified court system. This kind of contract provision typically reads as follows:
“This agreement shall be interpreted under the laws of the State of California. Any litigation under this agreement shall be resolved in the trial courts of San Diego County, State of California.”
While this wording is reasonably straight-forward, its meaning could be easily mistaken.
An indemnity clause demands that one person indemnify the other, or that both people indemnify each other, should certain expenses ever be incurred. This kind of contract provision could fluctuate greatly depending on the circumstances. This kind of contract provision typically reads as follows:
“The seller agrees to indemnify and hold harmless the buyer against loss or threatened loss or expense by reason of any liability or potential liability of the buyer arising out of any claims for damages that were incurred prior to the closing date.”
Caveat subscriptor. These kinds of contract terms can substantially increase a person’s vulnerability to liability should an unexpected situation arise. They can also be remarkably beneficial in getting someone to think twice about attempting to file a lawsuit without an airtight case.
Savings or Severability Clause
The majority of business contracts also incorporate a savings clause, which is intended to guarantee that the contract will still be enforceable even if a portion of it is later found to be invalid. This kind of contract provision typically reads as follows:
“If any provision of this Agreement is held unenforceable, then such provision will be modified to reflect the parties’ intention. All remaining provisions of this Agreement shall remain in full force and effect.”
In the absence of a severability or savings clause it is possible that, should a single clause be found invalid, a court may find the whole contract unenforceable.
If you are negotiating a contract, are interested in having a contract drawn up to memorialize your deal with another person, or need an experienced business contract attorney to examine and explain your contract, please reach out to the trusted and qualified business law and contract law attorneys at Leiva Law Firm by calling our law offices at 818-703-1777. Our attorneys speak both English and Spanish.