When dealing with other parties, most businesses create contracts. Usually, these contracts are (and should be) in writing. While some contract terms make complete sense to those in a certain business or industry, other terms confuse these same people. These confusing terms are probably the contract’s legal boilerplate terms. Below, I discuss three of terms and explain why they are important.
Governing Law Clause
The governing law clause is also called the choice of law clause. Contracts are interpreted and enforced under the laws of a particular state. You can choose which state law will be used to construe the contract. Governing law is important because different states may have different elements as to whether a contract was actually created.
Integration Clause
The integration clause is also called the entire agreement clause. It makes clear that the written signed agreement is the final agreement that contains all the terms to which all parties agree. All other prior agreements, unless included in the written contract, are null. Thus, any understanding stated in an email or during a conversation is not part of the final agreement.
The integration clause is important because it is evidence that there is a meeting of the minds between the contracting parties, something many states require in order to create a contract.
Severability Clause
If a term in your contract is deemed to be unenforceable (usually by an arbitrator or court), due to a severability clause, the other terms of the contract could remain in effect. The severability clause can save a business money and time because it eliminates the need for the renegotiation of a contract.
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