General clauses: Overview, definition, and example
What are general clauses?
General clauses are standard provisions found in many contracts that cover broad, essential topics not specific to the particular terms of the agreement. These clauses set the groundwork for the contract's overall operation and address various legal and procedural matters that apply to the entire agreement. Examples include clauses that govern dispute resolution, governing law, force majeure, confidentiality, and waiver of rights.
While general clauses may not always directly relate to the specific obligations or promises made between the parties, they ensure that the contract operates smoothly, outlining how unforeseen situations or issues should be handled. They help provide clarity, consistency, and protection for both parties.
Why are general clauses important?
General clauses are important because they ensure that a contract is comprehensive and covers all potential scenarios that could arise during its execution. These clauses help clarify how to handle issues such as disagreements, changes in circumstances, or legal complications, preventing confusion or disputes. They also help protect both parties by setting clear expectations on how certain matters should be addressed.
For businesses, having solid general clauses in place reduces the risk of misunderstanding and legal challenges, ensuring that the contract functions properly and equitably for all involved.
Understanding general clauses through an example
Imagine a company entering into a contract with a vendor for supply services. While the main focus of the contract is on the delivery and payment for goods, the contract also includes general clauses that outline what happens if there’s a delay due to a natural disaster (force majeure), how any legal disputes will be resolved (arbitration), and which laws will govern the contract (governing law). These general clauses address potential issues that could arise during the contract’s term, ensuring that both the company and vendor are prepared to handle such situations.
In another example, a business entering into a partnership agreement might include a general clause about confidentiality, ensuring that both parties keep sensitive business information private, even if the partnership ends. This protects each party’s intellectual property and business strategies from being disclosed or used inappropriately.
An example of a general clause
Here’s how a general clause might look in a contract:
“In the event of a dispute arising out of this Agreement, the parties agree to resolve the matter through arbitration in [insert location], and the decision of the arbitrator shall be binding. This Agreement shall be governed by and construed in accordance with the laws of [insert jurisdiction].”
Conclusion
General clauses are essential for ensuring that contracts are well-rounded and account for various legal and procedural matters that could arise. By including general clauses, businesses can address key issues such as dispute resolution, governing law, and confidentiality in a standardized and clear way. These clauses provide protection and clarity for both parties, helping to minimize the risk of conflict and ensuring smoother contract execution.
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.