Presidents Message: April 2017
As usual, I am receiving lots of questions about contracts and various components of a contract. I’ll explain the most recent inquiries regarding contracts below.
Term, Termination, & Survival:
The Term of a contract refers to the period of time during which a contract is valid. An evergreen contract is a contract in which the parties agree that there is no expiration date to the contract. Most contracts are bound by start and expiration dates and the terms and conditions of the contract apply from the start date until the expiration date or until the contract is terminated in accordance with a termination clause within the contract.
There are generally two types of Termination Clauses used in contracts: termination for default and termination for convenience. Termination for default gives one or both parties the right to cancel the contract when the other party has failed to fulfill its obligations, called committing a breach of contract. Termination for convenience gives one or both parties the right to cancel the contract for any reason – the other party did not have to fail to fulfill an obligation.
A Survival Clause in a contract indicates an agreement by the parties that certain promises within the contract will be enforceable even after the date of expiration or termination of the contract.
The Indemnity Provision:
Indemnity Provisions are important for controlling and allocating risk. To indemnify means to protect against harm, loss, or damage. Indemnity provisions often specify:
- Who will be responsible in the event of damage, injury, death, etc. related to the contract
- That the responsible party will be responsible for expenses such as those accrued in defending law suits and court costs
- That one party will protect the other from liability, including sometimes publicly assuming sole responsibility for the damage, injury, death, etc.
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