Components of a Contract

Contracts are easier to understand if broken down into parts. Unfortunately, those parts (and the labels to identify them) vary greatly from contract to contract.

Generally though, business contracts are organized like this:

1. The Beginning of the Contract

Title – Example: Master Services Agreement or Supply Agreement

Introductory Clause – Example: This Agreement is entered into effective as of ___ between ___ and ___.

Recitals – Recitals describe the principal purposes of the contract or provide background information for context. It is very important that the Recitals are accurate.

Lead-In – Example: The parties agree as follows:

If the contract is more than 20 pages, a Title Page, Table of Contents, and Index of Defined Terms are often included.

2. The Body of the Contract

Prime Clauses – Fundamental business terms (i.e. the heart of the deal)

General Clauses – Risk shifting, predominantly legal terms (heavily negotiated)

Boilerplate – Terms involving interpretation, validity and enforcement of the contract (lightly negotiated)

3. The End of the Contract

Concluding Clause – Restates the title of the contract, which is especially important if the signatures are separated from the body of the contract

Signatures – Identifies each party to the contract and the name and title of the person signing for that party

Attachments – Exhibits, Schedules, Appendices, etc., that are named in the body of the contract

Categories: Business Contracts

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