What is a Contract Clause?

A contract clause is a section or provision within a written contract or agreement. Each clause included in the agreement addresses some specific aspect of the overall covenant between the two parties that are agreeing to the terms and conditions detailed within the text of the document. The exact nature of a contract clause will vary, based on the laws of the land where the agreement is enacted, and the type of agreement that is being struck between the two parties.

Each contract clause contained within an agreement is aimed at defining the rights, privileges, and commitments that each party has determined represent the terms govern their working relationship. For example, in an employment contract, the employer agrees to provide the employee with a specific set of benefits, such as salary, health insurance, a retirement plan, and any other benefit that both parties have agreed is necessary. At the same time, the contract will contain clauses that determine the range of services that the employee will provide in exchange for these benefits. The idea is to include as much detail as possible, so that there is very little room for misinterpretation of what is expected of each party.

It is not unusual for a contract clause regarding proprietary information to also be included in many types of agreements. Vendors often include a clause of this type in their agreements with customers, essentially covenanting that any privileged information they may obtain in order to provide goods and services will be kept in the strictest confidence. In like manner, many employee agreements include a contract clause that prevents employees from providing competitors and others with access to confidential documents and data that is the property of the employer.

It is not unusual for a contract clause that can be used to cover incidents that develop later to be included in an agreement. For example, a contract stipulation of this type may specifically mention the use of company equipment such as laptops and cell phones, but also include legal terminology that would allow the contract to include any other type of communication or electronic equipment that the company may issue to the employee in the future. This type of clause helps to minimize the situations in which there is a need to make some sort of change to the written agreement, and thus keep contract modification from being a constant issue.

A well-written contract clause will always be easily understood by the two parties entering into the contractual agreement. At the same time, the clause must comply with the standards and regulations related to contractual agreements in place in the local jurisdiction. For this reason, the use of a legal professional, especially a contract attorney, is often the best way to go about creating a basic format that can be used as a standard contract with all vendors and customers.