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Common Contract Terms – Part III

It is important when you are reviewing a contract that you have a basic understanding of common contract terms and the importance of some of those common contract terms.

Headings. Most likely you will want to exempt the headings for the contract sections from being key terms of the contract. That is because headings are generally used for reference and convenience. A heading generally is not used for interpretation of contract terms. However, if you do not have a provision that states such, a party can argue that a heading was part of the contract term, which could have serious consequences to that term. So, if you do not have a provision that exempts headings from being contract terms, you will need to make certain that the headings do not conflict with the language of the term.

Counterpart. A counterpart provision is often used when parties are not in the same room to sign the contract. The provision will make clear that if the parties sign at a different time or electronically that all of those signatures are deemed to be in one single contract.

Severability of Covenants. Particularly in contracts that have workforce protection provisions, such as a non-compete or non-solicitation, there usually is a severability of covenants provision. This provision would make clear that if a court found the workforce protection term(s) to be unenforceable, that the remainder of the contract terms still remain enforceable.

Ambiguity. An ambiguity provision often is included to prevent a party from claiming that any ambiguity in a contract cannot be held against the drafter of the contract. That is because Minnesota law states that ambiguity is held against the drafter. Therefore, the party drafting the document generally includes an ambiguity provision that disallows a party from making this presumptive argument.

Representations and Warranties. A provision regarding representations and warranties needs to be carefully drafted. If a party makes a representation or warranty that is later deemed to be untrue, then most likely there will be a breach of contract, a warranty claim and possible a fraud claim against that party. It is prudent to be careful in making representations and warranties so that doing so does not come back to haunt an unwary party.

Spangler and de Stefano, PLLP assists business owners with reviewing and drafting contracts and leases.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.