Contract Key Elements
Contract Key Element #1: Party Identification
– NAMES. Your contract should begin by identifying the names of the two parties who will be signing the contract.
– AFFILIATION. If the two people who will be signing the contract are representing companies, corporations or organizations, this should follow the names of the parties.
– CONTACT. It is often a good idea to include contact information for each of the parties in the first paragraph of the contract, including addresses and phone numbers as applicable. This is especially important for a contract between two people or entities who do not live in the same state.
Contract Key Element #2: Recitals
– BACKGROUND. Briefly state what circumstances have brought the two parties together in the form of a contract.
– PURPOSE. What is the purpose for the contract or agreement? Be very clear and literal.
– ASSUMPTIONS. What roles will each of the two parties be assuming for the duration for the contract (i.e. employer and website designer).
Contract Key Element #3: Obligations
– REQUIREMENTS. What actions or obligations will each of the parties be required to fulfill before the term of the contract has passed?
– DATES. By what date (and time, if applicable) must the terms of the contract be met by both parties?
– DELIVERY. If there are deliverables, list what they are, who will pay for the delivery, the method with which they will be delivered, and any applicable timetables.
Contract Key Element #4: Terms
– LIMITATIONS. Some contracts are made for an indefinite period of time, while others expire once a project or usage has been completed. Detail exactly when and how the contract will expire.
– RENEWAL. If there is a required renewal for the contract, state when and how it can be extended.
Contract Key Element #5: Price
– LIST. Include a list of all costs, prices or monetary obligations for both parties.
– FORMULA. How are prices or costs determined? Include by the hour, by the project, by usage, or whatever method with which costs are formulated.
– TAX. What sales tax applies, if any, and how will it be calculated, and who is responsible for covering those taxes?
Contract Key Element #6: Payment Terms
– DUE DATE. When is payment for goods or services due? (i.e. Monthly, weekly, a timetable, upon completion, etc.)
– INSTALLMENTS. If one party is expected to pay in installments, give the exact dates when each payment is due.
– INTEREST. Include any applicable interest rates for installments or for credit, and make sure to include whether state limitations are enforced.
– PENALTIES. If payments are late, what penalties, if any, will be charged? (i.e. $5.00 for each day the payment is late).
Contract Key Element #7: Representations & Warranties
– REPRESENTATIONS. What representations are afforded by both parties?
– WARRANTIES. Under what circumstances will warranties be allowed?
– DISCLAIMERS. Under what circumstances will warranties be disclaimed?
– EXTENT. When will warranties expire?
Contract Key Element #8: Liability
– LIABILITIES. What liabilities do both parties exclude themselves from?
– ASSIGNMENT. Assign liabilities under specific circumstances for which you see a verifiable risk.
Contract Key Element #9: Termination of Contract
– EARLY TERMINATION. Under what circumstances can one party terminate the contract early?
– CONSEQUENCES: What penalties will be in place for early termination?