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TL;DR
Defines statements in contracts as written records or disclosures exchanged between parties, emphasizing their role in ensuring transparency and accountability. It outlines the importance of a statements clause, which specifies the types, frequency, and format of statements required, often used by lenders, investors, or clients to monitor performance and financial health.
What are statements?
Statements in a contract generally refer to written records, reports, or disclosures provided by one party to another. Depending on the context, these may include financial statements, account statements, compliance certificates, or progress reports. A statements clause outlines what types of statements must be delivered, how often, and in what format.
Why are statements important?
This clause ensures transparency and ongoing accountability between the parties—especially in financial, service, or performance-based contracts. It gives one party (often a lender, investor, or client) regular visibility into the other party’s operations, financial health, or contractual performance. Missing, inaccurate, or delayed statements can be grounds for breach or default, so this clause helps enforce regular communication and documentation.
Understanding statements through an example
A borrower enters into a loan agreement that requires it to submit quarterly financial statements to the lender. The statements clause specifies that these must include balance sheets, income statements, and cash flow statements prepared in accordance with GAAP. If the borrower fails to deliver the statements on time, it could trigger a default under the agreement—giving the lender the right to accelerate the loan or withhold future funding.
Example of a statements clause
Here’s how a statements clause may look like in a contract:
"The Borrower shall deliver to the Lender, within forty-five (45) days after the end of each fiscal quarter, unaudited financial statements, including a balance sheet, income statement, and statement of cash flows, and within ninety (90) days after the end of each fiscal year, audited financial statements prepared in accordance with GAAP by an independent accounting firm."
Conclusion
The statements clause creates a structured reporting obligation that supports transparency, oversight, and compliance. Whether you're monitoring financial condition, service performance, or contractual milestones, this clause helps ensure you receive the information you need to make informed decisions or take action if problems arise.
Frequently asked questions (FAQs)
Defines an annual statement as to compliance, detailing its purpose, key contents, legal importance, and an example clause for contractual use.
Defines statements true and correct clauses, confirming accuracy of information in contracts to ensure reliability and legal accountability between parties.
Defines a formal statement confirming facts or obligations in legal contexts, outlining purpose, importance, and example clauses for clarity.
Defines statements in certificates or opinions that confirm compliance, accuracy, and fulfillment of key contractual or legal obligations.
Defines a formal statement confirming compliance with specific facts or obligations, detailing its purpose, legal importance, and example clauses for contracts.