It is advisable to consider below financial/legal clause into consideration before signing of a contract. A very brief note against each clause is also mentioned.
- Commercial – All the commercial should be duly approved by authorized person only.
- Period of Agreement – Time period for which contract will be valid like contract will be valid for 2 years from date of signature of contract.
- Payment Schedule/Terms – Milestone payment should be clearly defined. Also due date of payment should be agreed. For e.g. payment will be due after 30 days of invoicing.
- Taxes – Contract amount should be exclusive of Taxes. If not possible, need to include clause mentioning taxes will be recalculated in case of any change in Law.
- Limitation of Liability (LOL) – This clause should be mutual and should be drafted very carefully.
- Termination Clause – Drafting of this clause should be in such a manner that both the party should be in a win-win situation.
- Late Payment – This clause will help getting the payment on time. Under this clause, applicable interest should be mentioned in case of delay in payment.
- Subcontracting – If vendor is supposed to outsource some work, this point should be clearly mentioned.
- Indemnity clause – This clause is for risk transfer of one part to another party. Mutual clause is always preferable.
- NDA – There should be a separate NDA between parties.
- IP Rights – It should be very clear as with whom IP right will remain, either in continuation of contract or in termination.
- Delay or Suspension of work – Party in fault should be at losing end.
- Jurisdiction – Very important clause to mention.
- Force Majeure – Again, Force Majeure should be clearly defined to restrict any unwanted obligation.
- Non-Compete and Non-Solicitation – Should be drafted as per requirement of contract.
- Signature – This is very important. Contract document should be signed by authorized person only. It should be signed by both the party.
Apart from these there can be other clauses in a contract like, Scope of work , Confidential Information, Return of Confidential Information, Sales policy, Order and Collection, Notices, Exclusion etc.
Manish Dalmia, FCA