What Does Initial Term Mean in a Contract

A franchisee enters into a five-year franchise agreement with a franchisor. The agreement contains a provision stipulating that the franchisee must comply with the terms and conditions of the operations manual. Disputes over the purchase price. If the parties fail to agree on the fair value of the assets within 30 business days of receipt of [PARTY A`s] notice of exercise of their call option, the fair value will be determined by three professionally certified appraisers, one of whom will be chosen by each party and the third by the two selected parties. Extension on new conditions. If [PART B] elects to extend under paragraph [RENEWAL OPTIONS], the parties will enter into a new franchise agreement under the then-current form of the franchise agreement [PART A]. A small business enters into a 12-month contract with an advertising agency to manage its promotional activities. Despite the duration of the contract of 12 months, a contractual term means that the contract is automatically renewed for an additional period of 12 months, unless the small business notifies in writing that it does not wish to renew the contract at least six months before the end of the initial term. According to the contract, the small business must pay a high fee if it wants to terminate the contract prematurely. Enter a term, and then click the entry that you want to display. The clause that allows the franchisor to vary the minimum number of cupcakes that the franchisee must sell is likely to raise concerns because it allows the franchisor to unilaterally make the contract more difficult for the franchisee. Such a clause is likely to result in a material imbalance in the rights of the parties and is unlikely to be reasonably necessary to protect the legitimate interests of the franchisor.

Below are some examples of how unfair contract term laws can be applied to specific contract terms. This term is unlikely to be a cause for concern. However, if the franchise agreement requires the franchisee to comply with the operations manual, the operations manual is part of the franchise agreement. This means that the terms of the instructions for use can be declared abusive and invalid. A small company enters into a contract for the provision of architectural services to a large company for a specific project. The contract contains a clause that obliges the small company to compensate the large company for all loss and damage suffered in connection with the project, including loss or damage caused by the large company. The clause requiring the small business to pay damages is likely to raise concerns because it allows the supplier to effectively penalize the small business in the event of termination, even if the supplier terminates without giving reasons. It is unlikely that such a clause will be necessary to protect the legitimate interests of the supplier. Expression.

«Term» means either the initial term or the renewal period then in progress. A small business signs a contract with a moving company for an office move. A provision of the agreement states that the moving company will not be liable for losses arising from the move, including damages resulting from the negligence of the moving company. The term clause often includes a renewal option. Others, . B such as an end user license agreement, such as an end user license agreement, may simply provide for a perpetual term, with both parties having the right to terminate under defined terms. The EULA are generally effective until termination and grant Licensee an indefinite right to use the Software. Agreements rarely define the respective version of the software. However, it may be better to grant a perpetual license for a particular version, set rights to subsequent updates and maintenance packages, and the price of those versions. This delay is likely to cause concern as it allows the advertising agency to automatically renew the contract without the express consent of the small business. Terms that may not be transparent include terms hidden in the fine print or appendices, or formulated in legal, complex, or technical language. However, a transparent term can still be an unfair term.

When deciding whether a term is unfair, a court must take into account the transparency of the term, as well as the general rights and obligations of each party under the contract. The court may also consider other relevant issues. THE INITIAL TERM is usually the first period covered by an agreement or contract (the duration) at the end of which the contract ends or is automatically renewed under specified conditions (renewal period), for example. a one-year contract. A small company signs a two-year contract for Internet services. According to a contractual clause, the Internet service provider has the right to change its prices or services at any time without notice to the small business. The small business does not have the right to terminate the contract, even if the Internet service provider significantly increases the price. Termination for cause.

Once the relevant entity becomes aware of a breach of any provision of this Agreement by a business partner, the relevant entity will give the business partner the opportunity to remedy or terminate the breach. The relevant Company may terminate this Agreement if the Business Partner fails to remedy or terminate the breach within the period specified by the Covered Company. Similarly, certain obligations should be maintained even after the termination of the agreement, even after the main purpose of the agreement. This is addressed in the survival clause, which explains which obligations «survive» at the end of the agreement and for how long. For example, it is common for confidentiality obligations to survive the end of an agreement. This term is likely to raise concerns as it seeks to limit the rights that the small business would otherwise have against the moving company. «A question on the standard form [of the American Industrial Real Estate Association] is the effective date. The parties should look beyond paragraph 1.3, Duration, which provides space for the start date of the lease term. Elsewhere in the lease agreement, subsection 3.3, Delay in Possession, provides that if the landlord does not deliver the premises to the tenant by the scheduled start date, no penalty will be imposed unless the landlord delays delivery of the premises by 60 days. In this case, a tenant only has the option of terminating the lease.

This section also provides that if the premises are not delivered within 120 days of the start date, the rental agreement ends automatically. These two paragraphs can become problematic if a dispute arises about construction delays for the tenant`s improvement of the premises, especially if the landlord is responsible for the work. «The duration of the agreement generally begins on the date of its entry into force. Caution should be exercised if you decide to let the term start on a different date. Ultimately, only a court (not the ACCC) can decide whether a term is unfair. Make sure that this clause contains provisions that only concern the actual duration of the agreement itself. (For example, some leases include provisions on the start date of the lease, the effects of delays in tendering the property, holding, etc.). These substantive clauses should be dealt with elsewhere in the agreement.) After the initial term of the agreement, provided that the combination of services and volume remain constant, the fees listed in the list of fees and services will be increased by the cumulative change in the national employment cost index for service-producing industries (finance, insurance, real estate) for previous contract years, as published by the Bureau of Labor Statistics of the U.S. Department of Labor. .

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