Content of the contract

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We have put together here a few points that can be useful to bear in mind when a contract is being drawn up. Remember that you can always get the assistance of a lawyer, and this is a good idea if you are not used to entering into contracts, or if the contract will contain a large number of provisions.

Title of the contract

The contract title is less important than its content, but the title can give a general idea of what the parties intend the contract to be, for example, a transfer, a lease, or grant of some kind.

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Introduction or purpose

It’s a good idea if the first section describes the background and purpose of the contract. What do the parties intend with the contract? This makes it easier for a third party (such as a court of law) to understand the various parts of the contract.

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The parties

It is important to specify who the parties to the contract are, even though sometimes that might seem obvious. Are the persons who negotiated the terms of the contract the persons entering into the contract, or did they simply negotiate the terms of the contract as representatives of an enterprise? Are there more parties than those who were present when you signed the contract? Always specify the correct name, address, corporate identity number and/or personal identification number of the parties.

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Definitions and interpretation of the contract

If there is a term used repeatedly in the contract that needs to be defined, it is good to do so at the start of the contract. Here you can also include things such as whether previous versions of the contract shall remain in force or not. If the parties have entered into other contracts with other parties, it might be stated here if these prior contracts will be affected by the new contract or not.

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The subject matter of the contract

What is the contract about? Describe the subject matter (the product or service) as precisely as possible. If the contract is an agreement to grant the right to use something, it is a good idea to specify if this is an exclusive right, or if the seller also has the right to conclude contracts for the same thing with others. It may also be appropriate to specify the geographical area covered by the contract, such as Sweden or Europe.

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Place and date

If the contract concerns products or services, it is good to specify the delivery date.

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Other terms and conditions

Who is responsible for transport, insurance, marketing and so on? Try to think about everything of importance for you to be able to fulfil your obligations under the contract, and come to an agreement on who is to do what. What responsibilities and powers do each of the parties have?

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Price

Pricing comes in many variants. Should payment be made at a fixed price? Or should the price vary depending on sales? Can a profit arise that should be distributed in some other way? And how should any losses be covered and how will they be allocated? The price may also be calculated per hour or per week. If variable compensation is applied, perhaps there ought to be a maximum amount.

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Payment

When and how should payment be made? After the goods have been delivered or the service performed, or in advance? How are the goods/service to be invoiced? In arrears (current account basis) or all at once?

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Delays in payment

What will happen in the event of non-payment or a delay in payment? In that case, can the seller place any demands on the purchaser? Will the purchaser be required to pay interest on late payments? Should the seller have the right to terminate the contract?

Read more about interest on late payments

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Delay in the product or service

What happens if a product or service is delayed or is not delivered/provided at all? Does the purchaser have the right to damages? How much and how should such damages be calculated per day, week or month overdue for example, and should there be an upper limit, for example 15 per cent of the value of the contract? Should the buyer have the right to terminate the contract? In that case, when? After one week, five weeks or 15 weeks of delay?

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Fault or error in the product or service

What will happen if the product or service is not what the buyer thought they were purchasing? Should the seller correct the fault or error, or will the purchaser have the right to terminate the contract immediately? Try to think about what could go wrong and what you and the other party can do about it. The possibilities are many, and should be covered in the contract. It is also important to agree on when the contract can be deemed to have been discharged by performance (all obligations fulfilled).

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Term of the contract and termination

Always specify how long the contract is to remain in force, for example from a specific date to a specific date, or from the date on which the contract has been signed by the parties for a specified period. It is also good to cover when the contract can be terminated (except in the case of a breach of contract) after a certain period of notice.

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Liability in exceptional circumstances

Contracts usually contain a non-liability clause or disclaimer for what is referred to as Force Majeure or Act of God events (a forest fire, earthquake, war, strike or major accident). It is important to include in the contract whether one of the parties, or both, do not need to fulfil their obligations under the contract in the case of such events.

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Disputes

If a dispute arises, it is always best to try to reach an agreement, because settling the dispute in a court of law or through arbitration can be expensive and is often a long process. But you can also agree in the contract to use mediation, conciliation documents or other alternative forms of dispute settlement.

Clauses requiring that any disputes are to be settled by arbitrators are found primarily in contracts between businesses. Arbitration is very expensive, but also faster and usually more discreet than normal court procedures. If you don’t agree in the contract on a method of dispute settlement, any disputes will be settled in a general court (the District Court, the Court of Appeal and ultimately the Supreme Court if the dispute is not settled in a lower court).

Read more about disputes (in Swedish)

In contracts involving more than one jurisdiction (international agreements), you should agree on which country’s law (which jurisdiction) is to apply in the case of a dispute.

Read more about international agreements (in Swedish)

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Signature and originals of the contract

Prepare as many originals of the contract as there are parties. Specify the place where and date on which the contract was signed by the parties. This may become relevant in the event of a dispute. When all parties have signed all the originals, each party takes one to keep.

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