Parts of a Contract

Before discussing the content of a contract, one should be familiar with the parts of the contract. Below are common parts of a contract. The reader should note that every contract varies so not every contract has all parts discussed in this article. Additionally, counsel should be sought for legal advice as to obligations and duties under a contract. Contact the Legal Information Clinic for a free consultation with an attorney or for additional resources.

1. Title: This should reflect the nature of the contract. Is your contract for consulting, NDA, license, etc.?
2. Preamble: This is the first paragraph of the contract and states the name of the agreement, parties, and the date of agreement. Some agreements do not have this section; however, if it does confirm the parties identified. Also, confirm status of business with local, state or federal agencies to assure they are in good standing with them.
3. Recitals: Immediately identifiable from WHEREAS. It follows the Preamble, and it states a brief overview of the contract without using enforceable terms. This provision might not be included in most modern forms.
4. Words of Agreement: This is exactly how it sounds, and  usually begins with “THEREFORE,” and it shows that the parties are in agreement with each other and there is an exchange of consideration.
5. Definitions: This provision is not in every agreement. Terms are usually shown if certain words or complex terms need to be explained fully. If the contract is for an international agreement, then the definition provision can assist with language barriers but use caution as definitions can also cause ambiguities that can be interpreted against the drafter of the contract.
6. Business Provisions: This deals with pay, performance, terms, closing date, duration of contract, time allowed, warranties, and conditions. This section usually provides negotiated terms.
7. General Provisions: The general provisions state how the parties will govern their contracts or agreement. This provision is referred to also as “boilerplate” provisions and are usually not negotiated; however, these terms are subject to negotiation too.
8. Signature Lines: Signature lines are at the end of the contract. It is important that the person signing the contract have the authority to execute it.
9. Exhibits: This part of contract provides additional or illustrations that are referenced in the contract itself. Important to note that 1) Exhibits should be physically attached to the contract and 2) language in the contract should include resolution in the event of conflict of language between the contract and Exhibit(s). Also, be aware of cross-reference to terms posted online or on a company website.

The COB Legal Information Clinic has other material on this subject.