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Contract Review Checklist
Before entering into a contract, you should review it to make sure it
contains all the necessary elements, you understand it, you have properly
accounted for all risks and duties imposed, and all likely contingencies
are addressed. The most efficient way to do this is through a checklist.
Besides working through a checklist, the reviewer or writer should be
familiar with all subject matters of the contract - some hard thinking
has to be done.
All contracts should contain the following basic provisions:
- Identification of the document as a contract of a particular type
- Identification of the parties. If there are multiple parties on one
or both sides of the contract, whether their responsibilities are individual
or joint and several
- Consideration, including issues such as fees, late charges, points,
and currency risk (if the consideration is not entirely payable in U.S.
dollars)
- Representations and warranties. Typically, in a business contract
both buyer and seller represent and warrant that they are corporations
in good standing, and that the corporation is authorized to enter into
the transaction and has obtained any necessary resolutions. The seller
represents and warrants that it has title to goods, that there are no
pending lawsuits or intellectual property issues to prevent the transaction,
that its financial statements are accurate and in proper form, and that
there is no finder's or brokerage fee due on the transaction, or that
arrangements have been made for paying it.
- Allocation of risk of loss, including when risk shifts to the buyer,
and any requirements for maintaining insurance
- Conditions on the transaction, e.g., regulatory approval; availability
of imported merchandise in adequate amount and quality
- What constitutes adequate performance under the contract -- quantity
/quality/standards of performance
- Term of the contract: dates for performance/renewals/extensions/indefinite
- Allocation of risk
- Definition of event in default, curing event in default
- Consequences of failing to cure event in default
- Remedies, limitation on liability, liquidated damage
- Hold harmless and indemnification
- Confidentiality and non-disclosure
- Non-compete covenants
- Guaranty of performance or payment
- Boilerplate provisions, such as choice of law (which state's law will
govern interpretation of the contract); severability of invalid provisions
and enforceability of the rest of the contract; and integration (the
"zipper clause" stating that the contract represents the entire
agreement of the parties and cannot be altered by parol evidence)
- Signatures
The following are common contract provisions:
1. Independent Contractors. The Parties are strictly independent contractors.
A is not, in any way, an employee, partner, joint venturer or agent of
B. A shall not, in any way, bind B to any person unless A has received
the written consent of B. A shall undertake all reasonable measures in
its operation to inform Third Parties that B has no direct or indirect
liability for any act or agreement taken by A and that B does not control
the performance of A.
2. Strict Compliance. No failure of a Party to exercise any right or to
insist upon strict compliance by the other Party with any obligation and
no custom or practice of the Parties at variance with this Agreement shall
constitute a waiver of the right of a Party to demand exact compliance.
Waiver by one Party of any particular default by the other Party shall
not affect or impair a Party's rights in respect to any subsequent default
of the same or of a different nature, nor shall any delay or omission
of a Party to exercise any rights arising from such default affect or
impair the rights of that Party as to such default or any subsequent default.
3. Severability and Independent Covenants. If any covenant or other provision
of this - Agreement is invalid, illegal or incapable of being enforced
by reason of any rule of law, administrative order, judicial decision
or public policy, all other conditions and provisions shall remain in
full force and effect. No covenant shall be deemed dependent upon any
other covenant or provision unless so expressed in this Agreement.
4. Governing Law and Forum. The terms of this Agreement shall be governed
exclusively by the Laws of the State of . not including the law on conflicts
of law, and the rules, regulations and procedures of agencies of the State
of . Any dispute arising from this Agreement that is not resolved through
Arbitration shafl be resolved only in the Courts and regulatory agencies
of or in the State of .
5. Full Agreement and Merger. The terms and conditions of this Agreement
constitute the full and complete agreement between the Parties. No other
verbal or written agreement shall, in any way, vary or alter any provision
of this Agreement unless both Parties consent to vary or alter any provision
of this Agreement in a signed writing. This Agreement is intended to be
an integrated writing and any prior oral or written agreements between
the Parties are merged into this Agreement and extinguished. No custom,
industry standard or course of dealing between the Parties shall in any
way vary or alter the terms and conditions of this Agreement.
6. Jointly Drafted. This Agreement shall be deemed to have been drafted
by both Parties and, in the event of a dispute, shall not be construed
against either party. OR Each Party waives the defense of contra proferentum.
7. Waiver of Equitable Remedies. The Parties waive all equitable remedies
including equitable rescission and rescission at law.
8. Bankruptcy. If, at any time, [a Party] seeks the protection of the
U.S. Bankruptcy Act of 1978, as amended, or any applicable state bankruptcy
law and:
a. Has a receiver in equity appointed for its property requests or
consents to the appointment of a receiver, or
b. Has a trustee in reorganization appointed for its property, or
c. Files a voluntary petition for reorganization or arrangement, or
d. Files a voluntary petition in bankruptcy, or
e. Files an answer admitting bankruptcy or agreeing to a reorganization
or arrangement, or
f. Makes an assignment for the benefit of its creditors, then this Agreement
shall expire. Any payments due from the bankrupt Party to the other
Party under this Agreement shall be deemed an administrative expense
under 11 U.S.C. § 503. This Paragraph shall not apply in the event
of a withdrawal or discharge of any petition that occurs within 45 days
of the date on which any such petition is filed.
9. Further Assurances. If requested by one Party, the other Party shall
execute and deliver such other documents and take such other action as
may be necessary to effect the terms of this Agreement.
10. Arbitration. Any controversy or claim arising out of, incident or
related in any way to this Agreement or the breach of this Agreement shall
be submitted to and resolved by to the American Arbitration Association
(AAA) in accordance with its Commercial Arbitration Rules and at its office
located in the District of Columbia. The resolution of the AAA shall be
binding on the Parties and either Party may enter any judgment or award
rendered by the AAA in any court of competent jurisdiction. Both Parties
shall be subject to the personal jurisdiction of the courts located in
and waive the right to assert lack of personal jurisdiction in legal proceeding.
11. No Assignment or Delegation. Neither party shall assign any right
under this Agreement nor delegate any duty under this Agreement unless
the other Party has consented t3 any such assignment or delegation in
a signed writing.
12. Authority to Execute. The undersigned individuals represent and warrant
that they are expressly and duly authorized by their respective entities
or agencies to execute this Agreement and to legally bind their respective
entities or agencies as set forth in this Agreement.
13. No Third Party Beneficiary. This Agreement shall not and is not intended
to benefit nor to grant any right or remedy to any person or entity that
is not a party to this Agreement.
14. Notices. All notices shall be sent by the most expeditious means available
including but not limited to facsimile, overnight courier or certified
or registered mail to the addresses set forth below the signatures. Any
such notice shall be deemed delivered when received.
15. Duplicate Counterparts. This agreement shall be executed in duplicate
by the parties, each to have the full force and effect of the original
for all purposes.
In addition, there are many provisions that should be included in specialized
contracts such as international, banking, sales of merchandise, employment,
etc.
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