Carve out: Definition, Example and Related Terms

A carve out is a specific provision in a contract that excludes or separates certain items, situations, or conditions from the main agreement. It's like creating an exception to the general rules of the contract. Think of it as 'cutting out' certain scenarios or circumstances that won't be governed by the main terms of the agreement.

For example, in a non-compete agreement, there might be a carve out that allows an employee to work in certain geographic areas or specific industry sectors that would otherwise be prohibited. Or in a confidentiality agreement, there might be a carve out for information that must be disclosed by law.

Carve outs are important tools in contract drafting because they help define the boundaries of an agreement more precisely. They can protect both parties by clearly stating what is and isn't covered by the contract's terms. Without proper carve outs, contracts might be too broad or restrictive, potentially leading to unintended consequences or legal issues.

When writing or reviewing contracts, it's crucial to carefully consider what carve outs might be necessary. They should be specific enough to serve their purpose but not so broad that they undermine the main intent of the agreement. Good carve outs strike a balance between protection and practicality.