What's In a Provision?

As a business litigation attorney, the majority of my lawsuits are over breaches of contract.

While I never recommend drafting or signing a contract without consulting a lawyer, I wanted to explain a few basic contract provisions.

  • Attorneys' fees: In the event of a legal dispute, the party that loses must pay the winning party's legal fees. In New York you pay your own attorney’s fees unless there is a statute or contract that says otherwise. So, it is a good idea to put this clause into every contract. But beware that it could work against you as well.
  • Arbitration: Any disputes about the contract must be resolved through arbitration proceedings, not in a lawsuit. These clauses can help resolve issues faster than going to court, but they also prevent going to court when that might be a much better option.
  • Choice of law: In the event of a dispute, a choice of law provision determines which state's legal rules will be applied in the lawsuit. This is included when there are parties from more than one state.
  • Jurisdiction: In the event of a dispute, a jurisdiction clause determines where (in which state and county) the lawsuit must be filed. Similar to above, however, it is possible to have the Court in one state but the law that governs the case is in another state.
  • Waiver: This permits the parties to give up the right to sue for breach of a particular provision of the agreement. Never give up your right to sue for something important, but this provision can help resolve lesser issues in the contact negotiations or prevent lawsuits over problems that both sides are aware of before the contract is signed.
  • Statute of Limitations Clause: A statute of limitations clause changes the statute of limitations which applies to litigation relating to the subject matter of the contract. For example, the law may provide for a six-year statute of limitations for litigations, but the parties can contractually agree to shorten that period.
  • Severability: This permits a court to take out an invalid provision and still keep the rest of the agreement intact. Very standard contract clause.
  • Integration: An integration clause says that the written contract represents the final agreement of the parties. This is to preclude a party from stating they were fraudulently induced to sign the contract based on outside information.
  • Limitations on damages: This sets a cap or otherwise limits the types of damages that may be awarded in a contract dispute.
  • Liquidated Damages Clause: Where it can be difficult to calculate actual damages, it may be appropriate to include a "liquidated damages clause" in a contract. The damages are "liquidated" in the sense that the contract sets forth a specific sum that will be paid as damages, no matter what the actual amount of damages may be.
  • Warranties: These are promises or assurances made by each party regarding various contract obligations.
  • Indemnity: In an indemnity provision, one party guarantees that it will cover the costs of certain disputes brought by third parties (that is, people who are not parties to the agreement). For example, contractors will indemnify building owners if one of their workers get hurt.
  • Confidentiality: This guarantees that the parties will not disclose certain information.

Thank you for reading, my business is to protect your business!

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