Material contract clause: Copy, customize, and use instantly
Introduction
A material contract clause defines which contracts are considered essential to a business or transaction. It ensures that key agreements, such as supplier contracts, customer agreements, or financing documents, are properly disclosed, maintained, or restricted from assignment or termination without approval. This clause is commonly used in M&A agreements, financing deals, and corporate governance policies.
Below are templates for material contract clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard material contract clause
This clause defines material contracts and requires disclosure.
The Parties acknowledge that all agreements that have a significant impact on the financial performance, operations, or obligations of either Party (“Material Contracts”) shall be disclosed in writing and attached as Schedule [X]. Neither Party shall amend, terminate, or assign any Material Contract without prior written notice to the other Party.
Material contract clause with prior consent for termination
This version prevents termination of material contracts without approval.
Neither Party shall terminate, amend, or waive any material provision of a Material Contract without the prior written consent of the other Party, except where such termination is required by law or regulatory action.
Material contract clause with financial impact threshold
This clause sets a financial threshold for what qualifies as a material contract.
For the purposes of this Agreement, a contract shall be deemed a “Material Contract” if it involves obligations exceeding [amount] or if its termination would reasonably be expected to result in a financial impact of [amount] or more.
Material contract clause with assignment restrictions
This version prevents assignment of material contracts without approval.
No Material Contract may be assigned, delegated, or transferred to a third party without the prior written consent of the other Party. Any attempt to assign a Material Contract in violation of this clause shall be void.
Material contract clause with disclosure requirement before execution
This clause requires disclosure of material contracts before signing the agreement.
Each Party shall provide the other Party with a list of all Material Contracts prior to executing this Agreement. No Material Contract may be modified, terminated, or assigned without prior written notice to the other Party.
Material contract clause with automatic inclusion of future material contracts
This version ensures that newly executed material contracts are covered under the agreement.
Any contract entered into after the Effective Date of this Agreement that meets the definition of a Material Contract shall automatically be deemed a Material Contract and subject to the terms of this clause.
Material contract clause with obligation to maintain contracts in good standing
This clause requires parties to keep material contracts active and enforceable.
Each Party agrees to take all reasonable steps to maintain its Material Contracts in good standing, including timely performance of all obligations, payments, and required renewals.
Material contract clause with early notice for material contract changes
This version requires advance notice before making changes to a material contract.
No Party shall amend, terminate, or assign any Material Contract without providing at least [number] days’ prior written notice to the other Party.
Material contract clause with impact assessment requirement
This clause requires an analysis of how a contract change may affect the business.
If either Party intends to amend or terminate a Material Contract, it shall first provide a written assessment detailing the expected impact on business operations, financial stability, and contractual obligations.
Material contract clause with right to review and approve new agreements
This version allows a party to review any proposed new material contracts before execution.
The [Other Party] shall have the right to review and approve any new Material Contract before it is executed, provided that such approval shall not be unreasonably withheld, conditioned, or delayed.
Material contract clause with restrictions on non-compete obligations
This clause ensures that material contracts do not impose non-compete restrictions without approval.
Neither Party shall enter into a Material Contract that includes a non-compete or exclusivity clause that would restrict its ability to conduct business, unless prior written consent is obtained from the other Party.
Material contract clause with required notice for breach or default
This version requires prompt notification if a party defaults on a material contract.
If either Party becomes aware of a breach, default, or potential termination of a Material Contract, it shall notify the other Party in writing within [number] days and take reasonable steps to remedy the situation.
Material contract clause with obligation to obtain successor approval
This clause ensures that successors or acquirers assume material contracts.
In the event of a merger, acquisition, or corporate restructuring, the successor entity shall assume all Material Contracts, unless otherwise agreed by the Parties in writing.
Material contract clause with indemnification for failure to maintain contracts
This version requires a party to cover losses if it fails to maintain its material contracts.
Each Party shall indemnify, defend, and hold harmless the other Party from any damages, liabilities, or losses resulting from its failure to maintain, perform, or comply with the terms of any Material Contract.
Material contract clause with force majeure exception
This clause allows flexibility for contract obligations during force majeure events.
If a Material Contract cannot be performed due to force majeure events beyond the reasonable control of the affected Party, such non-performance shall not constitute a breach of this Agreement, provided that reasonable efforts are made to mitigate the impact.
Material contract clause with right to cure before contract termination
This version gives a party a chance to fix issues before terminating a material contract.
If a Party intends to terminate a Material Contract, it must first provide written notice to the other Party and allow a cure period of [number] days to resolve any outstanding issues before termination is finalized.
Material contract clause with confidentiality requirement for material contracts
This clause requires both parties to keep material contracts confidential.
The Parties agree that the terms, conditions, and existence of all Material Contracts shall be kept strictly confidential and shall not be disclosed to third parties without prior written consent, except as required by law.
Material contract clause with right to dispute material contract changes
This version allows a party to challenge proposed changes to a material contract.
If either Party proposes a material change to a Material Contract, the other Party shall have [number] days to review and dispute the proposed change before it takes effect.
Material contract clause with penalties for unauthorized contract termination
This clause imposes financial penalties if a party terminates a material contract without approval.
If either Party terminates a Material Contract in violation of this Agreement, the non-breaching Party shall be entitled to damages in the amount of [specified amount] or as otherwise determined under applicable law.
Material contract clause with automatic notification for renewals
This version ensures that both parties are informed of material contract renewals.
The Parties agree that any Material Contract that is automatically renewed or extended shall be disclosed to the other Party within [number] days of renewal.
Material contract clause with priority enforcement in case of conflict
This clause ensures that material contracts take precedence over other agreements.
In the event of a conflict between this Agreement and any Material Contract, the terms of the Material Contract shall control, unless expressly stated otherwise in writing by both Parties.
Material contract clause with obligation to replace lost contracts
This version requires a party to replace a material contract if it is lost due to negligence.
If a Material Contract is lost, revoked, or terminated due to the negligence or misconduct of a Party, that Party shall take all necessary steps to secure a replacement contract with similar terms within [number] days.
Material contract clause with alternative dispute resolution for contract disputes
This clause requires mediation or arbitration if there is a dispute over a material contract.
If a dispute arises regarding the validity, enforceability, or interpretation of a Material Contract, the Parties agree to first engage in good-faith mediation. If mediation fails, the dispute shall be resolved through binding arbitration in accordance with [arbitration body] rules.
Material contract clause with requirement to notify stakeholders
This clause requires a party to notify key stakeholders of any material contract changes.
Each Party shall notify its key stakeholders, including lenders, investors, and regulatory authorities, of any material amendments, terminations, or assignments of a Material Contract that may affect business operations or financial standing.
Material contract clause with right to review counterparties
This version allows a party to vet counterparties before a material contract is executed.
Neither Party shall enter into a Material Contract with any third party without first providing the other Party an opportunity to review the counterparty’s financial condition, compliance history, and overall business stability.
Material contract clause with liability cap for breaches of material contracts
This clause limits financial liability for breaches of material contracts.
The liability of either Party for breaches of a Material Contract shall be capped at [specified amount], except in cases of willful misconduct, fraud, or gross negligence.
Material contract clause with express waiver of implied modifications
This version prevents claims that verbal discussions or conduct amount to material contract changes.
No amendment, modification, or waiver of any Material Contract shall be valid unless made in writing and signed by the authorized representatives of both Parties. No actions, discussions, or implied conduct shall constitute a modification.
Material contract clause with priority enforcement in insolvency
This clause ensures material contracts remain enforceable in case of insolvency or bankruptcy.
In the event of insolvency, bankruptcy, or corporate restructuring, the Parties agree that Material Contracts shall remain in full force and effect unless explicitly rejected by the bankruptcy court or other governing authority.
Material contract clause with obligation to mitigate risks before termination
This version requires a party to take reasonable steps to mitigate risk before terminating a material contract.
If either Party seeks to terminate a Material Contract, it shall take reasonable steps to mitigate any adverse consequences, including engaging in good-faith negotiations with counterparties and exploring potential alternatives.
Material contract clause with requirement to disclose contract performance issues
This clause mandates that performance issues under a material contract be disclosed.
If either Party becomes aware of performance deficiencies, disputes, or enforcement actions related to a Material Contract, it shall notify the other Party within [number] days and provide a remediation plan.
Material contract clause with right to request financial assurances
This version allows a party to request additional financial assurances for a material contract.
If concerns arise regarding the counterparty’s ability to fulfill its obligations under a Material Contract, either Party may request reasonable financial assurances, including guarantees, letters of credit, or performance bonds.
Material contract clause with review obligation for material contract risks
This clause requires regular reviews of risks associated with material contracts.
The Parties agree to conduct a periodic risk review of all Material Contracts every [number] months to assess compliance, financial impact, and potential legal risks.
Material contract clause with approval rights for modifications affecting obligations
This version requires written approval for any change that affects obligations under a material contract.
No amendment to a Material Contract that increases financial obligations, modifies deliverables, or changes key terms shall be effective unless approved in writing by the affected Party.
Material contract clause with carve-out for non-material provisions
This clause ensures that non-material provisions of a material contract can be amended without restriction.
Notwithstanding the foregoing, minor administrative changes or clarifications to a Material Contract that do not affect pricing, obligations, or core deliverables may be made without prior written approval.
Material contract clause with burden of proof for materiality disputes
This version assigns responsibility for proving whether a contract qualifies as material.
If a dispute arises regarding whether a contract qualifies as a Material Contract under this Agreement, the burden of proof shall rest with the Party asserting that the contract meets the criteria for materiality.
Material contract clause with sunset provision on reporting requirements
This clause limits how long a party must report on material contracts after the agreement ends.
The obligation to report on Material Contracts shall continue for [number] months after the termination or expiration of this Agreement, after which no further reporting shall be required.
Material contract clause with arbitration for material contract enforcement disputes
This version requires arbitration for disputes related to material contract enforcement.
If a dispute arises regarding the interpretation, enforcement, or performance of a Material Contract, the Parties agree to resolve the matter through binding arbitration in accordance with the rules of [arbitration body].
Material contract clause with responsibility for securing counterparties’ consent
This clause requires a party to obtain third-party consent before modifying a material contract.
If a Material Contract requires third-party approval for modifications, the Party initiating the change shall be responsible for securing such consent before implementing any amendments.
Material contract clause with data security requirements for material contracts
This version ensures that material contracts include data security obligations.
Any Material Contract involving the exchange, storage, or processing of sensitive data shall include industry-standard data security provisions to protect against unauthorized access, breaches, and misuse.
Material contract clause with fixed time limit on contract reassessment
This clause requires reassessment of material contracts at set intervals.
The Parties agree to reassess the list of Material Contracts every [number] months to determine whether any additions, removals, or modifications are necessary based on business needs.
Material contract clause with liability for failure to perform material obligations
This version imposes liability for failing to perform key obligations under a material contract.
Failure by either Party to perform a material obligation under a Material Contract shall be deemed a breach of this Agreement, entitling the non-breaching Party to pursue remedies as outlined in [remedies section].
Material contract clause with notification obligation for counterparties’ financial distress
This clause requires disclosure if a material contract counterparty experiences financial issues.
If either Party becomes aware that a counterparty to a Material Contract is experiencing financial distress, including insolvency, missed payments, or regulatory actions, it shall notify the other Party within [number] days.
Material contract clause with prohibition on unilateral assignment of material contracts
This version ensures that material contracts cannot be assigned without consent.
No Party shall assign, transfer, or delegate its rights or obligations under a Material Contract without the prior written consent of the other Party. Any unauthorized assignment shall be deemed void.
Material contract clause with severability of non-material provisions
This clause ensures that if a non-material provision in a material contract is unenforceable, the rest of the contract remains intact.
If any non-material provision of a Material Contract is found to be unenforceable or invalid, the remainder of the contract shall continue in full force and effect, provided that its material provisions remain intact.
Material contract clause with step-in rights for material contract defaults
This version allows a party to step in and assume obligations if the other party defaults on a material contract.
If a Party fails to perform its obligations under a Material Contract and such failure threatens business continuity, the non-breaching Party may step in and fulfill those obligations, with the right to recover costs incurred from the breaching Party.
Material contract clause with independent third-party monitoring
This clause allows a third party to monitor compliance with material contract obligations.
The Parties agree that an independent third party may be engaged to monitor compliance with the obligations set forth in all Material Contracts, with periodic reports provided to both Parties.
Material contract clause with insurance requirement for material contracts
This version requires insurance coverage for liabilities under material contracts.
Each Party shall maintain adequate insurance coverage to protect against liabilities arising from its Material Contracts. Proof of such insurance shall be provided upon request.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.