Jigsaw piece puzzle

Clause: Definition, Example and Related Terms

What is a Clause ?

In the simplest terms, a clause is like a building block of a contract. It's a section or part of a business deal that explains a specific point or condition.

So think of it like this, if a contract was a lego house, each clause would be a single lego piece that helps build the entire structure. Now, when it comes to commercial contracts, these clauses can cover a wide range of topics.

It could be about how payments should be made, how long the contract lasts, what happens if someone breaks the contract, and so on. Each clause helps to make sure everyone involved knows exactly what their responsibilities are, and what to expect from the other party.

This way, everyone is protected and there is less chance of misunderstandings or disputes later on. However, it's important to note that every clause in a contract must be clear and specific. If a clause is vague or confusing, it could lead to problems down the line. That's why it's so important to have a legal expert review all contracts before they are signed. They can make sure each clause is written in a way that is fair, legal, and in the best interests of the party they represent.


  • Scenario Description
    A business contracts with a supplier to provide raw materials for its products. In this case, there might be a clause in the contract that specifies how often the supplier will deliver the materials, how much they will deliver each time, and how much the business will pay for these deliveries. This clause ensures both the business and the supplier know exactly what is expected of them and helps avoid any misunderstandings or conflicts.
    A company hires a freelance graphic designer to create a new logo. The contract might include a clause that states the designer will hand over all rights to the logo to the company once it's finished. This makes sure the company can use the logo however they want without having to get further permission from the designer.
    Two businesses enter a partnership to develop a new product together. Their contract could have a clause that outlines what will happen if the partnership ends or if one party wants to leave. This could include details on how any shared assets or profits will be divided. This clause protects both parties by making sure there is a plan in place for any potential future changes to their partnership.