Frequently Asked Questions (FAQ)

How to identify the parties to a contract.

Identifying Individuals

If an individual is named as a party to a contract, then that individual will be liable for all of the obligations in the contract assigned to that party. Even if the individual uses a DBA or Fictitious Name (see below), that individual will still be liable for those obligations.

Conversely, if an individual is merely signing a contract on behalf of a business entity (see below), then odds are that individual will not be liable for the business’ obligations in the contract (but note there are some exceptions to that general rule).

Business Entities

If a business entity is named as a party to a contract (for example, a Limited Liability Company or Corporation), then that business will be liable for all of the obligations in the contract assigned to that party. Even if the business uses a DBA or Fictitious Name (see below), that business will still be liable for those obligations.

The individual signing the contract on behalf of the business entity will (generally speaking) not be liable for the business’ obligations in the contract.

DBAs & Fictitious Names

A DBA (or Doing Business As) or Fictitious Name is like an alias. Some states call them DBAs, some call them Fictitious Names, while other states don’t have any formal system for such aliases. Subject to applicable laws, both individuals and businesses may use fictitious names if they operate under a name other than their legal name. For example, John Doe might operate under the name Doe Designs. In that example, John Doe is still the party to the contract, even if the contract names Doe Designs as the party.

Who owns the work product and intellectual property created under a contract?

There are many laws that dictate who will own work product and intellectual property created under a contract (namely, copyright, trademark, trade secret, and patent laws). However, it is often a good idea to make it clear in your contract who will own those assets to avoid ambiguity.

In many situations the client will expect to own the works/IP since they are paying for them. In other situations, the contractor will expect to own the works and simply grant the client a license to use them. Whether the works/IP are assigned to the client may also have a direct relationship on the fees charged to the client.

If the parties elect for the client to own the works/IP, then the client will have the final say over whether the contractor may use those works/IP in the contractor’s portfolio. For that reason, you can insert a provision in the contract to allow that use (or you can choose not to include that provision and just seek permission later).

How to protect confidential information.

Generally speaking, if a party is disclosing its confidential information to the other party, it will want the other party to protect that information. Depending on the language you use, that may include (a) protecting it; (b) not using it without permission; (c) not disclosing it to third parties; and (d) more.
A confidentiality provision can be unilateral (in which case only one party is agreeing to protect the other party’s confidential information) or mutual (in which both parties are agreeing to do so).

Sometimes “Confidential Information” is defined in a narrow sense, or it may require something be stamped “CONFIDENTIAL” in order for it to be classified as such. Other times, the definition is more open ended. The default definition in Contract Canvas contracts is usually more open ended and includes all oral and written information which a reasonable person would deem confidential.

The obligation to protect the other party’s confidential information will normally run during the term of the agreement and for a period of years after the agreement terminates.

What is a non-solicitation of employees?

Many times, a party to a contract will not want the other party to solicit or hire away its employees. For that reason, you may include a non-solicitation of employees provision that says just that: that a party won’t solicit or interfere with the other party’s employees.

Note that this is not the same as a non-compete, which literally prevents an employee from competing with the employer within a geographic area and time period.

Also note that, since this provision may limit labor mobility, some states will limit its applicability or not enforce it at all.

What is a non-solicitation of clients?

Many times, both parties under a contract will provide services to a common client (usually originating from just one of the parties). Thus, the party that originated the client may want to prevent the other party from soliciting, interfering, or performing services for that client without going through the party that originated the client relationship. In those situations, you can include a non-solicitation of clients provision.

Note that this is not the same as a non-compete, which literally prevents an employee from competing with the employer within a geographic area and time period.

Also note that, since this provision may limit labor mobility, some states will limit its applicability or not enforce it at all.

What does Indemnification mean?

Indemnification is a mechanism to allocate risk between two parties. For example, if John Doe indemnifies NewCo against John Doe’s negligence, and if NewCo is sued because of John Doe’s negligence, then the indemnification provision may require John Doe to pay any monetary damages NewCo is found liable for and/or to pay for NewCo’s legal defense.

Indemnification provisions can be unilateral (in which case only one party is indemnifying the other party) or mutual (in which case both parties are indemnifying each other). They can also vary considerably in scope and applicability.

Depending on the situation and the relative power of each party, neither party, one party, or both parties, may demand indemnification from the other party.

How to terminate a contract early.

Parties to a contract can provide for many different types of early termination. In Contract Canvas contracts, you’ll find three default options (to which you can always add to using the Custom Terms section).

Breach & Cure

If this option is checked, then either party can terminate the contract early if they other party (a) breaches the agreement; and (b) fails to cure (fix) the breach within a set number of days after receipt of the notice. It is often (but not always) a good provision to include.

Voluntary Termination by Contractor

If this option is checked, then the contractor may terminate the contract early at any time, for any reason, simply by providing advance written notice to the client. The number of days of advance notice that is required is set by the users in the wizard.

Voluntary Termination by Client

If this option is checked, then the client may terminate the contract early at any time, for any reason, simply by providing advance written notice to the client. The number of days of advance notice that is required is set by the users in the wizard.

What is a notice provision? Why are addresses in the contract?

Many contracts will contain provisions that allow for (or require) one party to deliver a demand or notice to the other party. The exact date those demands/notices are delivered will usually start some kind of daily countdown. For that reason, many contracts will include a notice provision that says (a) where demands and notices must be sent; and (b) when they will be deemed delivered.

Physical Address

The physical address provided for the contractor and the client is the physical address where demands/notices must be sent. If a party moves from that address, they can update that address with the other party using the notice rules in the contract.

Email Address

The email address provided for the contractor and the client is the email address where demands/notices must be sent. If a party changes that email address, they can update that email address with the other party using the notice rules in the contract.