Drafting or Reviewing a Commercial Contract Checklist

by Practical Law Canada Commercial Transactions

Maintained • Canada (Common Law) View full document

A Checklist outlining what counsel should consider when drafting or reviewing the standard elements of
a commercial agreement, including term and termination, representations and warranties,
indemnification, limitations on liability, and miscellaneous and boilerplate provisions. This Checklist
focuses on the provisions that are generally included in contracts for the supply of goods and services
but are applicable to many types of commercial agreements.

Meet with Business Executives to Determine Exact Deal Terms

Ensure that all key agreed and desired deal terms have been communicated by the appropriate
business executives. For a sample contract review or preparation request form that employees can
use to communicate key information about proposed contracts to in-house counsel, see Standard
Document, Contract Review or Preparation Request Form.
Consider factors influencing the process of drafting and negotiating the agreement, including:

the size and scope of the transaction, including territory and whether the arrangement is
exclusive or non-exclusive;
the length of the agreement and any anticipated further business arrangements with the
counterparty;
the degree of contract standardization for the selected transaction;
any relevant competition law considerations, such as vertical, horizontal, and price
discrimination issues (see Practice Note, Resale Price Maintenance Under the Competition Act:
Overview; Practice Note, Resale Price Maintenance Under the Competition Act; Resale Price
Maintenance Checklist and Vertical Agreements Toolkit);
the relative bargaining positions of the parties and the importance of the specific contract to the
company's business as a whole;
the company's risk tolerance and the counterparty's creditworthiness and other risk factors;
which party, by role or other factors, is more likely to breach the agreement; and
the potential interplay between the agreement and other contractual arrangements, for example,
compliance with loan covenants (see Practice Notes, Loan Agreement: Positive
Covenants and Loan Agreements: Negative Covenants and Loan Agreement: Positive Covenant
Checklist and Loan Agreement: Negative Covenant Checklist).
Determine if there are applicable company policies in place with which the terms of the proposed
agreement must comply (for example, risk management, anti-bribery, or export compliance policies).
For a selection of sample company policies, see Employment Policies and Training Toolkit: Standard
Policies.
For more on preliminary considerations when negotiating commercial agreements, see Contract
Negotiations Checklist.
For a sample contract review and approval policy, see Standard Document, Contract Review and
Approval Policy.

Identify Contract, Parties and Effective Date

Ensure that the title of the agreement appears at the top of the first page, generally in bold typeface
for ease of identification, and reflects the type of agreement the parties are entering into.
Provide a short description of the parties to the contract and ensure that each is properly identified
by:

naming the appropriate counterparty;

considering whether related parties, such as subsidiaries, parent entities, or affiliates, should
be included;
using the full legal name of each party;
if there are multiple parties, stating whether party liability will be joint or joint and several; and
including each party's business address and the jurisdiction of incorporation or formation of each
legal entity.
 Specify the date on which the parties intend the agreement to be effective, considering whether the
agreement is effective:

on execution;
as of a specified past or future date; or
on satisfaction of certain conditions.

Address Specific Operational Aspects of the Agreement

Draft or review the key operative provisions and ensure they conform to the business team's
description of the transaction. Common provisions include:

appointment of seller, distributor, or service provider (or other similar provision addressing the
parties' agreement to buy and sell goods or services);
terms relating to exclusivity and territory (see Standard Document, Exclusive Distribution
Agreement (Pro-Supplier, Short Form): Section 1.1);
description of the goods or services;
ordering procedures (see Standard Document, Exclusive Distribution Agreement (Pro-Supplier,
Short Form): Section 5);
project management, including time frames, milestones, and project managers (names or job
titles);
shipment, delivery, acceptance, and inspection (in a supply of goods agreement) or scheduling
of deliverables (in a services agreement);
change orders (see Standard Document, Services Agreement: Change Order Form); and
non-financial obligations of the buyer or service recipient, such as requirements to comply with
marketing guidelines or maintain the condition, ownership status, and security of the service
provider's equipment left in the customer's possession.
Discuss any discrepancies in business terms with the business team.
Broaden or limit the scope of each operational clause to best support its transactional goals.
Comprehensively draft each clause to unambiguously address its rights and the other party's
obligations.
Consider whether to include express contractual remedies for the breach of these obligations.
For examples of deal-specific operative provisions from selected commercial contracts, see Standard
Documents, Distribution Agreement (Pro-Supplier, Long Form) and Promotion and Marketing
Agreement.

Determine Who Is Paying What to Whom, When, Why and How

Consider how the type of transaction may determine the pricing terms. For example, in:

a sale of goods transaction, pricing may be fixed for the duration of the contract, be based on a
formula (sometimes volume-related), vary according to specified factors like quantity or
frequency of purchase, or be subject to a most favoured nation provision that protects the
buyer against paying higher prices than the seller's other customers (see Standard Clause,
General Contract Clauses: Most Favoured Nation); and
a contract for the provision of services, it may be appropriate for pricing to be calculated on a
time and materials basis, fixed price basis, or combination of time and materials and fixed price
basis. For more information on pricing terms in services contracts, see Standard Clauses,
General Contract Clauses: Pricing Terms (Sale of Goods, Pro-Seller) and General Contract
Clauses: Pricing Terms (Services, Pro-Customer).
Determine when payment is due, including whether it is tied to a predetermined schedule or
contingent events (for example, on receipt of invoice or completion of milestones or services).
Shift and manage risk of delay or acceleration of required payments by allowing payments to be
either deferred or advanced.
Consider whether there should be any invoicing requirements and ensure that an invoice dispute
resolution procedure is in place.
Specify the method of payment (such as cheque or wire transfer) and currency.
Address any seller or service provider protections against late payment (see Standard Clause,
General Contract Clauses: Late Payment) or non-payment, including:

interest charges;
a security interest (whether a purchase money security interest (PMSI) or a more general
type of security interest (see Standard Document, General Security Agreement);
 letters of credit (see Standard Documents, Letter of Credit: Commercial and Letter of Credit:
Standby);
mandatory advances;
guarantees (from a larger more secure parent or investor (see Standard Document,
Commercial Guarantee); or
surety or performance bonds.
For more information on how parties to a sale of goods transaction can mitigate payment risks,
see Practice Note, Credit Support in Sale of Goods Transactions.
State whether the buyer (or service recipient) may set off any amounts it owes to the seller (or
service provider) against any amounts owed to it by the other party (see Practice Note, Set-Off in
Commercial Contracts and Standard Clause, General Contract Clauses: Set-Off).
For more information on drafting payment terms, see Standard Clauses:
General Contract Clauses: Payment Terms.
General Contract Clauses: Payment Terms (Commercial Letter of Credit).
General Contract Clauses: Payment Terms (Early Payment Discount).
General Contract Clauses: Payment Terms, Currency Conversion (Foreign Currency Option).

Draft or Review Major Risk Allocation Provisions

Use Representations and Warranties to Apportion Exposure to Potential Losses
Include standard representations and warranties affirming:

each party's incorporation (or formation), valid existence and, if applicable, good standing;
each party's extra-provincial registration or qualification to conduct business;
each party's corporate authority to enter into and perform the agreement;
each party 's compliance with laws;
the enforceability and validity of the agreement.
Negotiate additional representations and warranties that are tailored to the circumstances of the
transaction and the company's position in the agreement.
For an example of representations and warranties in a:
Consignment agreement, see Standard Document, Consignment Agreement (Pro-Consignor):
Section 13.
Distribution agreement, see Standard Document, Distribution Agreement (Pro-Distributor, Long
Form): Article XV.
Sale of goods agreement, see Standard Document, Sale of Goods Agreement (Pro-Seller, Long
Form): Article XIII.

Limit the Effect When Making Representations and Warranties

Attempt to limit or qualify the effect of representations and warranties by:

narrowing their scope;

disclosing exceptions and adding materiality and knowledge qualifiers;
limiting their survival period;
including an anti-sandbagging clause;
making indemnification the exclusive remedy for inaccuracy; or
including contractual limitations on liability, such as caps and baskets.
Disclaim representations and warranties that are not expressed in the written contract and include
acknowledgement of non-reliance on any extra-contractual representations and warranties.
Ensure consistency of representations and warranties with other contract provisions, especially:

product warranties (see Standard Clause, General Contract Clauses: Product Warranty and
Disclaimers);
termination rights (see Standard Clause, General Contract Clauses: Term and Termination); and
indemnification provisions (see Indemnification Toolkit).

Maximize the Effect When Receiving Representations and Warranties

Maximize the effect of representations and warranties by:

 retaining broadly worded representations and warranties and resisting those that are overly
qualified or limited (see Standard Clause, General Contract Clauses: Representations and
Warranties); and
negotiating a sufficient survival period (see Standard Clause, General Contract Clauses:
Survival).
Resist including disclaimers and acknowledgements of non-reliance.
Preserve the right to rely on representations and warranties known to be inaccurate by resisting the
inclusion of an anti-sandbagging clause and negotiating instead for the inclusion of a sandbagging
provision.
For more information on drafting and negotiating representations and warranties, see:
Standard Clause, General Contract Clauses: Representations and Warranties.
Practice Note, Relationship Between Representations, Warranties, Covenants and Conditions.
Practice Note, Representations, Warranties, Covenants and Conditions.

Ensure That Product or Service Warranties Have the Appropriate Scope

Sellers of goods and services should try to narrow their obligations by:

limiting express warranties to specific language stated in the agreement;

conspicuously disclaiming all other warranties, including express conditions and warranties not
included in the agreement and all implied conditions and warranties;
expressly limiting the buyer's remedies for breach of product or service warranties;
ensuring the scope of any warranty they give to downstream customers is within the scope of
warranty they receive from their upstream suppliers, if applicable;
identifying any conditions precedent to the buyer's entitlement to any remedies; and
specifying any conditions that invalidate an express warranty, such as failure to give timely
notice.
Buyers of goods and services should try to limit their risk exposure by:

negotiating more comprehensive warranties (for example, by including requirements that goods
conform to product specifications);
including express warranties (such as fitness for a particular purpose, merchantability, non-
infringement, accuracy, and completeness); and
providing third-party beneficiary rights for the buyer's customers and successors in interest.
For examples of product and service warranty provisions, see:
Standard Clause, General Contract Clauses: Product Warranty and Disclaimers.
Standard Document, General Purchase Order Terms and Conditions for the Sale of Goods (Pro-
Buyer): Section 15.
Standard Document, Reseller Agreement (Pro-Supplier): Section 17.02.
Standard Document, Professional Services Agreement (Long Form): Section 10.2.
For more information on drafting and negotiating express and implied warranties, see Practice Note,
Implied Conditions and Warranties.

Determine Agreement Length and Define Termination Triggers

Decide whether the term of the agreement will be:

time-based;
project-based; or
dependent on a related agreement.
Determine whether either or both parties have the right to renew the agreement. If so:

include any condition to renewal;

determine if the renewal will be automatic or evergreen (see Standard Document, Notice of
Renewal);
consider how renewal rights may affect renegotiation of the agreement; and
decide whether to build in automatic price adjustment for renewal periods.
For more information on drafting renewal terms, see Standard Clause, General Contract Clauses:
Term and Termination: Drafting Note, Renewal.
Decide whether either or both parties have the right to terminate the agreement for:
 cause (requiring the terminating party to identify a specific breach by the other party); or
convenience (allowing a party to terminate at any time without providing a reason to the other
party).
Define the events or actions that trigger a party's right to terminate (for example, for material
uncured breach or on the occurrence of a change of control).
List the provisions that will survive the termination and define the survival period.
Consider the termination procedure, including any required notice period.
Set out the obligations of each party on expiration or early termination of the agreement, for
example, any obligations to:

make a termination payment (for convenience-based termination);

render a final accounting or accelerate outstanding payments;
return or dispose of tangible and intangible property (for example, confidential information); or
transition to a new supplier.
For more information on term and termination provisions, see Standard Clause, General Contract
Clauses: Term and Termination, Standard Document, Termination Agreement (Mutual) and Standard
Document, Notice of Termination.
For more on using termination provisions to allocate risk in a commercial contract, see Practice Note,
Risk Allocation in Commercial Contracts: Termination Rights as Risk Allocation Tools.

Structure an Indemnification to Cover the Company's Risks

Determine whether an indemnification clause is desirable or appropriate for the agreement. For
example, the benefits of having an indemnification clause may not outweigh the time and expense
of negotiating it if:

the parties are not worried about accessing deeper pockets to cover claims;
the likelihood of claims is remote; or
any claims are likely to be for small amounts.
If an indemnification provision is undesirable or inappropriate, consider an alternative such as:

relying on statutory indemnification; or

using other risk allocation provisions to limit overall risk.
Define the indemnification obligation and the indemnified persons, considering whether the
indemnification provision should:

be unilateral or mutual, or contain separately defined reciprocal provisions;

include an obligation to defend or hold harmless; and
only benefit the opposing contractual party or extend to non-parties to the agreement (for
example, the opposing party's employees, officers, directors, affiliates, representatives, and
customers).
Define the scope of recoverable losses and indemnifiable events by considering:

which types of claims and losses the indemnification provision will cover;
the phrase used to dictate how closely the losses must relate to the indemnifiable event (such
as "losses solely resulting from the indemnifiable event" or "all losses relating to the
indemnifiable event") (for more information on nexus phrases, see Practice Note,
Indemnification Clauses in Commercial Contracts: Choosing the Right Nexus Phrase); and
how to narrow the scope of the indemnification (for example, by specifying exceptions or
including contractual limitations on liability).
Establish an indemnification procedure.
For more information on drafting and negotiating indemnification provisions, see:
Practice Note, Indemnification Clauses in Commercial Contracts.
Drafting and Negotiating an Indemnification Clause Checklist.
Indemnification Toolkit.

Decide Whether to Require Insurance Coverage

Specify the types of insurance required for each party, the duration of coverage and the minimum
limits.
Address whether and to what extent the parties may self-insure.
 Confirm whether the insuring party must obtain a waiver of subrogation rights from the insurance
company.
Describe whether and on what terms the insured party must add the other party as an additional
insured or provide the other party with evidence of insurance.
If contemplating the inclusion of an insurance covenant for expanded coverage, consult with risk
management and insurance specialists to assess:

the need for deal-related insurance coverage beyond existing coverage;

the scope of acceptable contractual insurance obligations for each party;
the optimal and minimal contractual insurance requirements for the counterparty; and
whether the covenant should be mutual or unilateral.
For information on drafting insurance covenants, see Standard Clause, General Contract Clauses:
Insurance Covenant (Sale of Goods).

Specify the Remedies Under the Contract and Include Any Limitations
Limit or extend the scope of contractual and judicial remedies that apply to the contractual
relationship by including a combination of:

cumulative remedies (see Standard Clause, General Contract Clauses: Cumulative Remedies
(with Exclusive Remedies Carve-Out);
equitable remedies (see Standard Clause, General Contract Clauses: Equitable Remedies);
liquidated damages (see Standard Clause, General Contract Clauses: Liquidated Damages);
sole remedy (for an example of a sole remedy provision, see Standard Document,
Manufacturing and Supply Agreement (Pro-Seller): Section 8.03);
governing law (see Practice Note, Governing Law and Standard Clause, General Contract
Clauses: Governing Law);
choice of forum (see Practice Note, Choice of Forum and Standard Clause, General Contract
Clauses: Choice of Forum);
entire agreement (see Standard Clause, General Contract Clauses: Entire Agreement); and
waiver provisions specifying when a waiver of rights occurs (see Standard Clause, General
Contract Clauses: Waivers).
Consider the agreement's remedial provisions together with other contract terms to ensure
consistency and avoid ambiguity. Where needed, parties should carve out exceptions for certain
types of losses or obligations, including, for example:

indemnification obligations (see Indemnification Toolkit);

non-infringement or misappropriation breaches;
confidentiality breaches (see Practice Note, Remedies for Breach of Confidence or Breach of
Non-Disclosure Agreement);
losses due to gross negligence or wilful misconduct (see Practice Note, Negligence, Gross
Negligence and Wilful Misconduct); and
liabilities that one party has assumed, for example, liability for pending litigation (see Certificate
of Pending Litigation Motion Toolkit (ON)).

Tailor the Limitation of Liability Provision to Meet the Company's Needs

Consider the type of transaction and the company's role in the transaction to determine its position
in favour or against a limitation of liability provision. For example, if the company is:

the seller in a sale of goods where the greatest liability risk generally rests with the seller, the
company may push to include a limitation of liability provision; or
the buyer in a sale of goods, the company may resist a limitation of liability provision because it
wants a broad range of remedies available to it.
Determine whether the limitation of liability provision applies to:

the contract as a whole;

only to specific terms; or
one or all parties to the agreement.
Use a waiver of indirect damages to limit the scope of recoverable damages to direct damages,
excluding indirect damages such as:

Indirect, consequential, and incidental damages;

 special damages; and
punitive and exemplary damages.
Evaluate whether a waiver of indirect damages should be subject to carve-outs:

for fraud, intentional, or reckless misconduct; or

a party's indemnification obligations relating to third-party claims.
Include a liability cap to limit the company's maximum liability for all damages relating to the
contract to:

a flat dollar amount;

fees paid or payable under the contract or a multiple of that number; or
a percentage of fees paid or payable under the contract.
If using a liability cap, consider whether to carve out any exceptions. For example, a customer in a
sale of goods transaction may wish to expressly exclude certain cost-sensitive obligations of the
seller (such as indemnity) to offset the liability cap on the amount of direct damages it may receive
from the seller.
For more information on drafting limitation of liability clauses, see Standard Clause, General Contract
Clauses: Limitation of Liability.

Include Limitation of Damages Provisions that Protect the Company

Determine which party, if any, is more likely to breach the contract. For example, in:

a sale of goods or a distribution agreement, the seller is more likely to breach its
representations, warranties, and performance obligations; and
a service agreement, the service provider is more likely to breach because it has more
performance obligations than the customer.
Draft limitation of damages provisions that reduce the liability of the company if it breaches the
agreement. Limitation of damages provisions curtail or prohibit the non-breaching party's potential
claims and include:

conditions (see Practice Note, Representations, Warranties, Covenants and Conditions);

limitations of liability (see Tailor the Limitation of Liability Provision to Meet the Company's
Needs);
force majeure provisions (see Standard Clauses, General Contract Clauses: Force Majeure
(Short Form) and General Contract Clauses: Force Majeure (Long Form));
exclusive remedies provisions (see Standard Clause, General Contract Clauses: Indemnification
(Unilateral Long Form): Section 2.6); and
survival provisions (see Standard Clauses, General Contract Clauses: Survival and General
Contract Clauses: Contractual Limitation Period).
For a comparison of contractual remedies and limitation of damages provisions, see Practice Note,
Remedies: Adequate Liability Coverage.

Safeguard Corporate Assets

Address Ownership and Use of the Company's Intellectual Property
Consider the nature of the product or deliverables and determine what types of intellectual
property (IP) rights might arise from their creation (for example, patent, copyright, trademark,
or trade secret rights). For a discussion of the types of IP rights that arise under Canadian law,
see Practice Notes, IP Overview and IP Ownership in Employment.
If either or both parties own rights to background IP (IP that is developed under the contractual
relationship), that will be used in the performance of the transaction, address how that background
IP may be used by the other party in the context of the transaction.
Negotiate the ownership of rights to foreground IP (IP that is developed under the contractual
relationship). Consider each party's anticipated future use of the foreground IP. If one party is
developing any foreground IP for ownership by the other party, the agreement should address
whether:

the creator's copyright and other IP rights need to be assigned to transfer ownership to the other
party;
there are any carve-outs from the transfer of IP rights that the creator or other third party is
merely licensing to the owner for this particular product or deliverable.
If the agreement contains an IP licence agreement, the parties should consider:
 the beneficiaries of the licence (for example, whether it is limited to the buyer or customer or
whether it is sub-licensable to its affiliates or downstream customers);
the licence term and whether it is perpetual or for a specific time period;
whether it is exclusive or non-exclusive;
whether any licence fees or royalties are payable;
its geographic scope;
any limitations on use;
other user obligations (for example, obligations to protect the IP and to assign goodwill derived
from the use of the covered rights); and
the user or licensee's indemnification rights for third-party claims of infringement.
For an example of an IP provision in a services contract, see Standard Document, Professional Services
Agreement (Long Form): Section 8.
For an example of an IP provision in a contract for the sale of goods, see Standard Document,
Manufacturing and Supply Agreement (Pro-Seller): Article IX.
For an overview of the various types of IP rights arising under Canadian law, see Practice Note, IP
Overview.

Protect the Company's Confidential Information

Determine whether the agreement should include a confidentiality provision and, if so, whether the
confidentiality obligations should be mutual or unilateral. For sample stand-alone mutual
confidentiality and non-disclosure agreements, see Standard Documents:

Confidentiality and Non-Disclosure Agreement: General (Short Form, Mutual);

Confidentiality and Non-Disclosure Agreement: General (Long Form, Mutual);
Confidentiality and Non-Disclosure Agreement: General (Short Form, Mutual, Abridged
Boilerplate); and
Confidentiality and Non-Disclosure Agreement: Simple (Mutual, Pro-Discloser).
For examples of unilateral confidentiality provisions, see Standard Clauses:

General Contract Clauses: Confidentiality (Supply of Goods & Services, Long Form); and
General Contract Clauses: Confidentiality (Supply of Goods & Services, Short Form).
For stand-alone unilateral confidentiality and non-disclosure agreements, see Standard Documents:

Confidentiality and Non-Disclosure Agreement: General (Short Form, Unilateral, Pro-Discloser);

Confidentiality and Non-Disclosure Agreement: General (Long-Form, Unilateral, Pro-Discloser);
Confidentiality and Non-Disclosure Agreement: General (Short Form, Unilateral, Pro-Recipient);
Confidentiality and Non-Disclosure Agreement: General (Long Form, Unilateral, Pro-Recipient);
and
Confidentiality and Non-Disclosure Agreement: Simple (Unilateral, Pro-Discloser).
For sample special purpose confidentiality agreements, see Standard Documents:

Confidentiality Agreement: Early-Stage Business (Pro-Discloser);

Confidentiality Agreement: Joint Venture Negotiations;
Confidentiality Agreement: Lending;
Confidentiality and Non-Disclosure Agreement: Employment;
Confidentiality and Non-Disclosure Agreement: M&A; and
Confidentiality and Proprietary Rights (IP) Agreement.
Define confidential information under the agreement, including any exceptions to that definition
(such as information in the public domain or information that is independently developed).
Specify the obligations of the receiving party, including those related to:

non-disclosure of confidential information, including any exceptions (such as to affiliates and

representatives or to comply with legal requirements);
treatment and care of confidential information;
use of confidential information (for example, solely for exercising rights and performing under
the agreement); and
length of confidentiality and non-use obligations.
Include instructions for the destruction or return of confidential information (see Standard Clause,
General Contract Clauses: Confidentiality (Supply of Goods & Services, Short Form): Drafting Note,
 Return or Destruction of Confidential Information (Optional)), including:

when the obligation is triggered (automatically or at the discloser's request);

whether the confidential information must be returned or destroyed and at which party's
discretion;
any time frames for compliance; and
any rights to retain any confidential information and on what terms.
Provide equitable remedies for breach of the confidentiality provision (if not provided for elsewhere
in the agreement).
For more information on the protection of confidential information, see Practice Notes:
Confidentiality and Non-Disclosure Agreements.
Remedies for Breach of Confidence or Breach of Non-Disclosure Agreement.
Misuse of Confidential Information: Causes of Action & Remedies.
Misuse of Confidential Information: Defences.

Negotiate Audit and Inspection Rights

Consider including inspection rights if it is desirable to have access (for example, in a supply and
distribution agreement or to ensure corporate property and assets are properly used) to:

products held in inventory or where sold; or

materials needed to fulfil a party's obligations contained in the agreement.
To audit compliance under the agreement, determine whether either or both parties must provide the
other party:

access to its books and records; and

the right to inspect its facilities and warehouses.
Consider including appropriate limitations on these rights (such as restricting their timing and
frequency and requiring prior notice of audit or inspection).
Consider whether the audited party should be required to pay for the cost of the audit if a material
discrepancy is discovered.
For an example of how audit and inspection rights are used in a reseller agreement, see Standard
Document, Reseller Agreement (Pro-Supplier): Article XIV.
For an example of how audit rights are used in a services agreement, see Standard Documents,
Professional Services Agreement: Drafting Note, Records; Audit and Promotion and Marketing Master
Agreement: Drafting Note, Provision of and Access to Client Materials.
For sample audit and inspection rights clauses, see Standard Clauses:
General Contract Clauses: Audit and Inspection Rights (Short Form).
General Contract Clauses: Audit Rights.
General Contract Clauses: Inspection Rights.

Include Clear Dispute Resolution Mechanisms

Consider the type of transaction and the parties' relationship when choosing which dispute
resolution clauses to use. Dispute resolution options range from simple to complex. Mechanisms to
consider include:

escalation clauses to resolve disputes without resorting to litigation or arbitration (for an

example of an escalation clause, see Standard Clause, General Contract Clauses, Alternative
Dispute Resolution (Multi-Tiered), and for an example in a distribution agreement, see Standard
Document, Distribution Agreement (Pro-Supplier, Long Form): Section 21.18); and
arbitration. For more information on drafting arbitration clauses, see Standard Clauses, General
Contract Clauses: Arbitration and General Contract Clauses: Arbitration (Ad Hoc) and Practice
Notes, Commercial Arbitration in Canada: Overview and Ad Hoc Arbitrations in Canada.
Carefully consider the pros and cons of litigation and arbitration before committing to one or the
other.

Do Not Overlook the Importance of Miscellaneous and Boilerplate

Provisions, Signatures, and Attachments
Narrowly draft miscellaneous and boilerplate provisions to suit the needs of the agreement. For
more information on miscellaneous and standard clauses, see General Contract Clauses
 Toolkit and Standard Clause, Boilerplate Provisions.
Include a signature block to avoid unintentional consequences that may result from a failure to
include the appropriate information, such as an individual incurring personal liability for failing to
include the name of the corporation that was intended as the obligor to the contract (see Standard
Clause, General Contract Clauses: Testimonium, Attestation and Seals).
Ensure that individuals signing on behalf of the company have authority to bind the company.
Consider whether the agreement is governed by statute of frauds laws that provide that certain
types of agreements are only enforceable if they are in writing and signed, and whether electronic
signatures are sufficient to satisfy the signature requirement (see Practice Note, Electronic
Contracts and Electronic Signatures and Standard Clause, General Contract Clauses: Electronic
Signatures and Electronic Delivery).
Ensure that any documents referred to in the agreement are physically attached to the end of the
agreement, for example:

schedules, such as a schedule of goods, a trademark list, or exceptions to representations and

warranties; and
exhibits, such as specifications, trademark policies, or a form of confidentiality agreement for
auditors.
For more information, see Standard Clause, General Contract Clauses: Schedules and Appendices.