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Provision: Definition, Example and Related Terms

What is a Provision ?

A provision in the context of a contract is a specific term or condition that sets out an obligation, requirement, or stipulation that one or more parties must follow. Think of it as a rule or guideline within the contract that details what needs to be done or complied with. It often includes specific requirements or details on how certain aspects of the contract will be executed or enforced. Each provision is a building block of the contract, outlining the responsibilities, rights, or arrangements agreed upon by the parties involved.

For example, a contract might have a provision that requires delivery of goods by a certain date. This provision ensures both parties know the deadline and can plan accordingly. If the supplier fails to meet this requirement, the provision might allow the buyer to cancel the order or claim compensation.

Provisions can cover a wide range of topics, including payment terms, confidentiality agreements, dispute resolution procedures, and more. They are crucial in clearly establishing the framework within which the parties must operate, and they help minimize misunderstandings and manage expectations.

It's important to carefully review all provisions in a contract before agreeing to it. This is because each provision can have legal and financial implications and can significantly affect the overall agreement.

Example(s)

  • Scenario Description
    Lease Agreement Provision A lease agreement includes a provision that allows the tenant to sublet the apartment with the landlord’s consent. This provision grants the tenant the flexibility to find a subtenant if needed, provided they obtain the necessary approval.
    Sales Contract Delivery Provision A sales contract contains a provision requiring the delivery of products within 30 days of purchase. This provision ensures the buyer receives their order in a timely manner, and establishes a clear timeline for the supplier.
    Confidentiality Provision An employment contract features a confidentiality provision prohibiting the employee from disclosing company trade secrets to outsiders. This provision protects the company's sensitive information and maintains competitive advantage.