Nowadays, contracts have become an inseparable part of everyday life. When someone is going to work, that person will first sign a contract with the company. When someone is going to rent a building, that person must also sign a rental contract. Even when someone is going into debt, the person who owes and gives the loan will sign a contract first. In the applicable rules regarding contracts, no one specifically regulates what clauses / provisions must be in a contract. However, because contracts are crucial, especially when there are actions or transactions that give rise to civil relations, it is necessary to know what important clauses should be in a contract. To find out what are the important clauses in question, Contract Law will provide an explanation below.
What is a Contract?
According to Black’s Law Dictionary, a contract is defined as an agreement between two or more people that creates an obligation to do or not do something specific. Agreement itself is defined as an act or event in which one person promises to another or in which the two people promise each other to carry out a matter. From an agreement made, a relationship arises between the two people who make it, the relationship is called an engagement. In other words, an agreement as a contract is an obligation that has legal consequences because there are obligations that must be fulfilled and bind the parties. Because contracts are part of agreements, the rules of law that apply to contracts are the rules that also regulate agreements in the Civil Code.
Terms of Agreement Considered Valid
In the agreement, there is one principle called the principle of freedom of contract which is regulated in Article 1338 paragraph 1 of the Civil Code. The article states that all agreements made legally apply as laws for those who make them. To be considered valid, an agreement must fulfill four conditions, including:
- Agreement of those who bind themselves.
- Capacity to enter into an agreement.
- Regarding a certain matter.
- A lawful cause, not against the law or decency.
So, everyone is allowed to make an agreement about anything and contains anything and the agreement will bind the parties who make it like a law.
Important Clauses in Contracts
The principle of freedom of contract makes the parties free to determine what provisions or clauses need to be in the contract made. As long as the clauses are not contrary to the law and the agreement is carried out in good faith, the contract is valid and binds the parties to fulfill their obligations as stipulated in the contract. However, the clauses in the contract should cover important aspects, including:
- The identity of the parties to the contract.
- The introduction usually contains the position of the parties to the contract.
- Definition, if there are terms in the contract and must be given an explanation so that there is no confusion in interpreting the term.
- The scope of the contract, the form of cooperation or limitations in the contract.
- Rights and obligations of the parties.
- Payment terms include the method or manner in which payment is made.
- The period of validity of the contract and the method of termination.
- Representations and warranties of the parties.
- Provisions regarding compensation.
- Clauses regarding taxation that the parties must fulfill.
- Notification or how to provide notification to other parties related to the implementation of the agreement
- Violations and sanctions.
- Contract cancellation.
- Force majeure.
- Confidentiality.
- Dispute resolution including the chosen jurisdiction and applicable law.
- Cover.
- Contract attachments if any.
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