Best Legal Practices:

Important Contractual Clauses

Duty to amicably resolve controversy To avoid costly and expensive costs of litigation, the
parties may stipulate on a mutual obligation to meet and convene promptly and expeditiously in
good faith for the purpose of amicably settling a dispute or controversy. They may agree that
such a duty is a condition precedent prior to initiating any legal action or proceeding. To be
effective, this stipulation must clearly specify the procedure to be taken, the timelines to be
observed, and all documentary evidence needed for the meeting.
Venue The parties may agree as to which courts will have jurisdiction in case of a dispute or
controversy in the contract. They may even stipulate to a sole and exclusive jurisdiction of a
particular court to the exclusion of all others.
Arbitration For the speedier resolution of issues and leseser costs on the parties, they may
agree to arbitration. They must specify what arbitral tribunal, who will be the arbitrators, and
what rules will be followed in the arbitration.
Governing Law For international transactions where one party is a foreigner or where the
contract is executed outside the Philippines, the parties should state therein that the contract
will be interpreted, governed, and enforced in accordance with the laws of the Republic of the
Philippines should that be their intention.
Release, waiver, and quitclaim The parties may provide for a clause on release, waiver, and
quitclaim whereby the injured party will absolve the erring party from any and all liability.
Free and harmless A free and harmless clause is an undertaking of a party to hold the other
free and harmless from any liability arising out of or in connection with what the former may do
in order to perform his contractual obligations.
Standard of care The parties may agree to a higher standard of care than the default one
which is the due diligence of a good father of a family.
Force majeure The parties may agree to non-liability in case of a force majeure, as well as
increase its coverage, including but not limited to, strikes, lockouts, boycotts, industrial/labor
disputes, acts/orders/rulings of the Government, whether national or local. Conversely, the
parties may agree to liability despite a force majeure.
Representations The parties may make representations that the signatories thereto are duly
authorized to enter into the contract, as well as warrant that all necessary corporate approval
have been duly obtained and the legal documents evidencing such are existing. The parties

may undertake to execute any and all documents, well as perform all necessary steps, to
accomplish the purpose of the contract.
Relationship of the parties The parties may clearly specify their relationship to each other,
whether they are partners, principal, agent, contractor, sub-contractor, etc. Conversely, they
may stipulate that no such relationship exists by and between the parties.
Non-waiver The parties may agree that the failure to insist on the other the strict performance
of any contractual obligation does not result in the waiver of any cause of action arising
therefrom. They may agree that a waiver requires to be in writing and signed by the party
making the waiver.
Non-disclosure The parties may stipulate on a non-disclosure agreement to protect the
confidential or sensitive information.
Assignment The parties may agree that their contractual rights or obligations may be
assigned or transferred. Conversely, they may agree that such is non-transferrable.
Tax consequences The parties may agree as to who of them will shoulder any tax
consequence that may arise from the contract. They may also agree to a proportional sharing.
Penalties The parties may stipule on liquidated damages that will serve as penalty for nonperformance or failure to comply with the obligations.
Separability A separability clause ensures that the remaining terms and conditions, which are
not void or have not been annulled, are valid and binding.
Termination The parties may agree that the contract may be for a certain duration or project
only.
Effectivity The parties may stipulate as to when the contract will be effective, in order to create
the rights and obligations therein.
Entirety The parties may agree that the written contract reflects the entire terms and
conditions that they have agreed upon on the subject matter superseding all other prior
agreements or arrangements. The parties may agree that any revision on the new contract
requires that the same be in writing and signed by both parties.

06JANUARY

THINGS TO CONSIDER WHEN DRAFTING A BUSINESS CONTRACT

A business contract is a legal agreement between two or more parties that specifies a shared
objective. When conducted in the appropriate manner, business contracts are a great way for
two companies to work together and gain benefits through the purchase or sale of products and
services. Although various types of business contracts exist, and there are a few key factors to
consider that will aid you in the process of drafting a successful business contract.
Choosing the right form:
A written contract will assure your business safety from misinterpretation in the case that
something goes wrong. Verbal contracts are increasingly difficult to interpret in court and may
result in extreme complications for both parties involved, so be sure to have everything written
down.
Less is more:
When deciding what to include when drafting a business contract be sure to keep it simple. The
goal of the contract is to assure that both parties know and understand exactly what is expected
of them; leave no room for interpretation, use common terminology and stick to the essentials.
Be specific:
The importance of detail in a business contract is crucial to the protection of your company.
Keep in mind all of the possible situations that may arise and be certain to include the main
details:

Accurate identification of both parties

Performance obligations of both parties

Form of payment

Specification of who is paying

How much is being paid

When and where payment will take place

Agreed upon termination circumstances

The state law in which the contract will apply to

Trust the business you are working with:

Nothing is more important than having a trusting relationship with the person(s) you are entering
into a contract with. A good relationship will assure performance of the agreed upon obligations

in the contract and rid your company of worry. If the individual being dealt with seems uncertain
or hesitant, further investigation should be taken before agreement takes place.
Often times, you may want an attorney to review or assist in writing you companys business
contract before you sign. Learn more about how our business law team can help.