Breaking Down Five Common Contract Clauses (With Sample Language)

While no two contracts are alike, most will include boilerplate clauses that can be found in a wide variety of agreements. These common clauses are usually located towards the end of a contract and cover some basic understandings between the parties. Knowing the impact these clauses have on the overall effectiveness and longevity of an agreement can best prepare you to negotiate effectively. Below you will find a breakdown of the five most common contract clauses, as well as some sample clause language:

Amendments Clause

An Amendments Clause covers any proposed changes to a contract after the date the agreement is signed by both parties. Typically, this clause will allow the parties to change any of the terms of the agreement, provided that it is put in writing and signed by both parties.

Sample:

"No amendment or other modification of this Agreement or waiver of any term hereof shall be effective unless in writing and signed by both parties."

Counterparts Clause

A Counterparts Clause allows the parties to sign the agreement in the comfort of their physical location and doesn't require them to be in the same room, signing the contract at the same time. Accordingly, the two separately signed agreements when put together, act as the same contract. This clause is meant for convenience and allows the parties to enter into contractual relationships regardless of where they might be and in how many separate parts the document is signed.

Sample:

"This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument, without necessity of production of the others. An executed signature page delivered via facsimile transmission or electronic signature shall be deemed as effective as an original executed signature page."

Integration/Merger Clause ("Entire Agreement Clause")

An Integration/Merger Clause, also known as an Entire Agreement Clause provides that all discussions, agreements, terms, conversations and communications, whether oral or written, between the parties have been embodied in the contract and nowhere else. If the parties discussed something and it is not in the contract, it has no effect. In principle, only the provisions within the four corners of the contract apply.

Sample:

"This Agreement is the entire, final, complete, and fully integrated agreement between the Parties with respect to the subject matter hereof and supersedes any prior agreements or communications between the Parties, whether written, oral, electronic or otherwise."

Severability Clause

A Severability Clause is meant to keep a contract enforceable despite any failings in drafting the agreement. Essentially, if a provision or term is poorly drafted, illegal or otherwise cannot hold up against scrutiny, a court can strike that provision or term from the contract, while keeping the remainder in tact and enforceable. This clause also arose out of matters of convenience. Instead of asking the parties to renegotiate a new contract, this clause allows the parties to remove the bad language and maintain the agreement and their relationship.

Sample:

"If any term or provision of this Agreement shall, to any extent, be determined to be invalid or unenforceable by a court or body of competent jurisdiction, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law."

Governing Law/Choice of Law Clause

A Governing Law/Choice of Law Clause allows the parties to choose which State's laws will be relied upon in interpreting the contract, should it ever come before a court. Since each State has its own separate and distinct laws, there are benefits to interpreting contracts according to one state's laws versus another. One major area where this often arises is regarding statutes of limitation. These laws provide the timeframe within which a party must bring an action in court. For example, a breach of contract claim must be brought before a court within four years in California, whereas in New York, a party has six years to bring the claim. Scenarios like these can make or break contract litigation and its crucial that the parties choose the State's laws that are most applicable to their contract.

Sample:

"The validity of this Agreement, the construction of its terms and the determination of the rights and duties of the parties hereto shall be governed by and construed in accordance with the laws of the State of New York."

While these clauses can be found in a majority of contracts, it's important that you have a basic understanding of these terms, so you can make an informed decision about the contracts you sign. Hopefully this can help to demystify some of the language in contracts and give you a leg up during your next negotiation.

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.