# Clause Library A reference of common commercial contract clauses with plain-language explanations, market-standard positions, and negotiation notes. All language is a starting point - have qualified legal counsel review before use. --- ## Definitions ### Confidential Information **Market-standard mutual NDA language:** ``` "Confidential Information" means any information disclosed by one party (the "Disclosing Party") to the other party (the "Receiving Party"), either directly or indirectly, in writing, orally, or by inspection of tangible objects, that is designated as confidential or that reasonably should be understood to be confidential given the nature of the information and the circumstances of disclosure. ``` **Standard exclusions (always include):** ``` Confidential Information does not include information that: (a) is or becomes generally known to the public other than through the Receiving Party's breach of this Agreement; (b) was rightfully known to the Receiving Party before receipt from the Disclosing Party; (c) is received from a third party without restriction on disclosure; or (d) was independently developed by the Receiving Party without use of the Disclosing Party's Confidential Information. ``` **Plain-language explanation:** "Confidential Information" covers anything sensitive shared between the parties that isn't already public. The four exclusions are standard and non-negotiable - they prevent absurd outcomes like treating publicly available information as confidential. **Negotiation note:** Vendors often try to narrow the definition to only written materials marked "CONFIDENTIAL." Resist this - oral disclosures in demos and technical discussions are highly sensitive and should be covered. --- ## Indemnification ### IP Indemnification (vendor protects customer) **Market-standard language:** ``` Vendor shall defend, indemnify, and hold harmless Customer and its officers, directors, employees, and agents from and against any claims, damages, losses, and expenses (including reasonable attorneys' fees) arising out of or relating to any third-party claim that the Service, as delivered by Vendor, infringes or misappropriates any patent, copyright, trademark, or trade secret of a third party. Vendor's obligations under this section are conditioned upon: (a) Customer providing prompt written notice of the claim; (b) Customer granting Vendor sole control of the defense and settlement; and (c) Customer providing reasonable cooperation. Vendor shall have no obligation for claims arising from: (i) Customer's modification of the Service; (ii) use of the Service in combination with products not provided by Vendor; or (iii) Customer's failure to use an updated version of the Service that would have avoided the claim. ``` **Plain-language explanation:** If someone sues the customer claiming the vendor's software steals their IP, the vendor pays to defend that lawsuit. The three carve-outs are standard - the vendor isn't responsible if the customer caused the infringement. **Negotiation note:** Customers should insist on an IP indemnity uncapped from the liability cap. Vendors should insist on sole control of the defense. Both positions are standard. --- ## Limitation of Liability ### Mutual liability cap **Market-standard SaaS language:** ``` IN NO EVENT SHALL EITHER PARTY'S AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE TOTAL AMOUNTS PAID OR PAYABLE BY CUSTOMER TO VENDOR IN THE TWELVE (12) MONTHS PRECEDING THE EVENT GIVING RISE TO THE CLAIM. ``` **Standard carve-outs (must be explicitly listed):** ``` The foregoing limitation of liability shall not apply to: (a) either party's indemnification obligations under Section [X] (Intellectual Property Indemnity); (b) either party's confidentiality obligations under Section [X]; (c) damages arising from a party's gross negligence or willful misconduct; (d) damages arising from death or personal injury caused by a party's negligence; or (e) any liability that cannot be excluded or limited by applicable law. ``` **Plain-language explanation:** No matter how bad the breach, the most either party can recover is one year's fees. The carve-outs prevent this cap from shielding truly egregious behavior - IP theft, confidentiality breaches, and personal injury claims remain uncapped. **Negotiation note:** Customers push for higher caps (24 months) or uncapped for data breaches. Vendors resist. A reasonable compromise for high-sensitivity data: uncapped for data breaches involving regulated data (health, financial). --- ### Mutual consequential damages exclusion **Market-standard language:** ``` IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS, LOSS OF REVENUE, LOSS OF DATA, LOSS OF GOODWILL, BUSINESS INTERRUPTION, OR COST OF SUBSTITUTE GOODS OR SERVICES, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ``` **Carve-outs** - same as for the liability cap; add indemnification obligations. **Plain-language explanation:** Neither party can sue the other for lost profits, lost customers, or other downstream harms - only direct losses. This prevents a scenario where a $10,000 contract creates unlimited liability for a business that lost a $10M deal due to downtime. --- ## Confidentiality Obligations ### Receiving party obligations **Market-standard language:** ``` The Receiving Party shall: (a) use the Confidential Information of the Disclosing Party only to evaluate or pursue the business relationship contemplated between the parties (the "Purpose"); (b) protect the Confidential Information of the Disclosing Party using at least the same degree of care that the Receiving Party uses for its own Confidential Information of similar nature, but in no event less than reasonable care; (c) not disclose the Confidential Information of the Disclosing Party to any third party without the Disclosing Party's prior written consent; and (d) limit disclosure to those employees and contractors who have a need to know for the Purpose and who are bound by confidentiality obligations at least as protective as those in this Agreement. ``` **Negotiation note - residuals clause (RED FLAG):** Vendors sometimes insert: > "Notwithstanding the foregoing, the Receiving Party may use Residual Knowledge > for any purpose. 'Residual Knowledge' means information retained in the > unaided memories of the Receiving Party's personnel who have had access to > the Confidential Information." This clause effectively allows employees who saw confidential information to use it for any purpose after they remember it. It is a significant weakening of confidentiality. Strike it entirely or narrow to specifically identified categories that genuinely cannot be controlled (e.g., general skills and know-how, not product roadmaps or customer lists). --- ## Term and Termination ### Termination for cause **Market-standard language:** ``` Either party may terminate this Agreement upon written notice if the other party materially breaches this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice specifying the breach in reasonable detail. ``` **Plain-language explanation:** Either party can exit if the other seriously violates the contract - but only after giving 30 days to fix it. The 30-day cure period prevents termination over minor or unintentional violations. **Negotiation note:** For certain breaches (payment failure, IP infringement, data breach), the breaching party should not receive a cure period or it should be shortened to 10 days. Add carve-outs for incurable breaches. ### Termination for convenience **Market-standard SaaS language:** ``` Either party may terminate this Agreement for any reason or no reason upon sixty (60) days' prior written notice to the other party. ``` **Negotiation note:** Vendors sometimes resist termination-for-convenience entirely (particularly in annual contracts). Customers should insist on a T4C right, even if the notice period is longer (90 days) or a fee applies (one month's fees). ### Effect of termination **Key provisions to include:** ``` Upon expiration or termination: (a) all licenses granted hereunder shall immediately terminate; (b) each party shall return or certify destruction of the other party's Confidential Information within thirty (30) days; (c) Vendor shall make Customer Data available for export in machine-readable format for sixty (60) days, after which Vendor may delete all Customer Data; and (d) all payment obligations accrued prior to termination shall survive. ``` --- ## Service Level Agreement (SLA) ### Uptime commitment **Market-standard SaaS language:** ``` Vendor will use commercially reasonable efforts to make the Service available with a Monthly Uptime Percentage of at least 99.9% ("Uptime Commitment"). "Monthly Uptime Percentage" means the total number of minutes in a calendar month minus the number of minutes of Downtime during that month, divided by the total number of minutes in that calendar month. "Downtime" means a period of more than five (5) consecutive minutes during which the Service is unavailable, excluding: (a) scheduled maintenance windows communicated at least 48 hours in advance; (b) customer-caused outages; (c) force majeure events; and (d) third-party service provider outages outside Vendor's reasonable control. ``` **SLA credit schedule (standard):** ``` Monthly Uptime | Credit < 99.9% | 10% of monthly fees < 99.0% | 25% of monthly fees < 95.0% | 50% of monthly fees ``` **Plain-language explanation:** 99.9% uptime means no more than ~44 minutes of downtime per month. Credits are the sole remedy for SLA failures - customers cannot sue for damages from downtime if the SLA credit structure applies. **Negotiation note:** Customers with mission-critical workflows should push for SLA credits as a floor, not a ceiling, or negotiate a right to terminate for repeated SLA failures (e.g., three months below 99.9% in a 12-month period). --- ## Governing Law and Dispute Resolution ### Governing law **Market-standard language:** ``` This Agreement shall be governed by and construed in accordance with the laws of the State of [Delaware/New York/California], without regard to its conflict of laws provisions. ``` **Negotiation note:** Delaware is neutral and favored for corporate matters. New York is favored for financial agreements. Each party will push for their home jurisdiction. Delaware or New York are usually acceptable compromises for U.S. parties. ### Dispute resolution - arbitration clause **Market-standard commercial arbitration language:** ``` Any dispute, controversy, or claim arising out of or relating to this Agreement, including the formation, interpretation, breach, or termination thereof, shall be resolved by binding arbitration administered by JAMS in accordance with its Comprehensive Arbitration Rules. The arbitration shall be conducted by a single arbitrator in [City, State]. The arbitrator's award shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Either party may seek emergency equitable relief in a court of competent jurisdiction to prevent irreparable harm pending the appointment of an arbitrator. ``` **Plain-language explanation:** Instead of going to court, disputes go to a private arbitrator (JAMS is a major provider). Arbitration is faster and more confidential than litigation. The carve-out for emergency injunctions is important - you don't want to wait for arbitrator appointment to stop a confidentiality breach. --- ## Assignment ### Standard anti-assignment with M&A carve-out **Market-standard language:** ``` Neither party may assign or transfer this Agreement, or any rights or obligations hereunder, without the prior written consent of the other party, which shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without consent in connection with a merger, acquisition, reorganization, or sale of all or substantially all of its assets, so long as the assignee agrees in writing to be bound by the terms of this Agreement. Any purported assignment in violation of this section shall be null and void. ``` **Negotiation note:** Customers should add a right to terminate if assigned to a direct competitor. Vendors should ensure the acquirer is not restricted from using the product after an M&A event. --- ## Data Protection ### Controller-processor relationship (GDPR Article 28 summary clause) **Key language for a DPA or SaaS agreement:** ``` To the extent Vendor processes Personal Data on behalf of Customer in connection with the Services, the parties agree that: (a) Customer is the controller and Vendor is the processor of such Personal Data; (b) Vendor shall process Personal Data only in accordance with Customer's documented instructions; (c) Vendor shall implement appropriate technical and organizational measures to protect Personal Data against unauthorized access, disclosure, alteration, or destruction; (d) Vendor shall notify Customer without undue delay, and in any event within seventy-two (72) hours, upon becoming aware of a Personal Data Breach; (e) Vendor shall assist Customer in responding to Data Subject rights requests; and (f) upon termination, Vendor shall delete or return all Personal Data as directed by Customer. ``` **Plain-language explanation:** The customer owns and controls the data; the vendor only processes it as instructed. The 72-hour breach notification aligns with GDPR's mandatory notification window for controllers to notify their supervisory authority. --- ## Force Majeure ### Standard force majeure clause **Market-standard language:** ``` Neither party shall be liable to the other for any delay or failure to perform its obligations under this Agreement (except payment obligations) if such delay or failure is caused by circumstances beyond its reasonable control, including acts of God, natural disasters, pandemic, government action, war, terrorism, labor disputes, or failures of third-party internet providers, provided that: (a) the affected party gives prompt written notice of the force majeure event; (b) the affected party uses commercially reasonable efforts to resume performance; and (c) if the force majeure event continues for more than ninety (90) days, either party may terminate the Agreement upon written notice. ``` **Plain-language explanation:** If an earthquake or pandemic prevents performance, neither party is in breach. Payment obligations are explicitly excluded - a vendor cannot claim force majeure to avoid paying invoices. The 90-day termination right prevents indefinite suspension of the contract.