Atomic Contract Provision

A Atomic Contract Provision is a written contractual term (within a contract document) that represents a single, distinct, indivisible unit of a contract term.

• Context:
  • It can (typically) be contained within a Contract Clause.
  • It can range from being a Performance-Related Provision (obligation provisions, permission provisions, ...) to being a Relationship Management Provision (termination provisions, ...) to being a Declarative Statement Provision (governing law provisionss, ...)
  • It can range from being a Conditional Provision to an Unconditional Provision.
  • It can range from being a Single-Element Provision to a Two-Element Provision to a Many-Element Provision.
  • It can range from being a General Contract Provision to a Contract-Specific Provision.
  • It can be referenced by a Contract Issue Spotting Rule.
  • It can range from being a One-Sentence Atomic Contract Provision, to being a Two-Sentence Atomic Contract Provision, to being a Three-Sentence Atomic Contract Provision.
  • It can range from being a Unannotated Atomic Contract Provision to being an Annotated Atomic Contract Provision (annotated contract provision).
  • ...
• Example(s):
  • Performance-Related Provisions, such as:
    • Obligation Provisions, such as:
      • Unconditional Obligation Provisions, such as: a monthly rent payment provision requiring the tenant to pay a specified amount of rent each month.
      • Conditional Obligation Provisions, such as a casualty damage repair provision that is triggered by a casualty event.
    • Permission Provisions, such as:
      • Unconditional Permission Provisions, such as a Permitted Use Provision in a software license agreement specifying how the licensee may use the licensed software without any conditions.
      • Conditional Permission Provisions, such as a Sublease Consent Provision permitting the tenant to sublease the property if certain conditions are met, such as obtaining the landlord's prior written consent.
    • Representation and Warranty Provisions, such as:
      • Unconditional Representation and Warranty Provisions, such as a Seller's Title Warranty Provision guaranteeing that the seller has clear and marketable title to the goods being sold.
      • Conditional Representation and Warranty Provisions, such as a Product Warranty Provision that is contingent upon proper use and maintenance of the product by the buyer.
    • Force Majeure Provisions, such as:
      • Unconditional Force Majeure Provisions, such as a provision excusing a party's performance in the event of any force majeure event, without any qualifying conditions.
      • Conditional Force Majeure Provisions, such as a provision that requires the affected party to provide prompt notice and take reasonable steps to mitigate the impact of the force majeure event.
    • Remedy Provisions, such as:
      • Unconditional Remedy Provisions, such as a Liquidated Damages Provision that specifies a fixed amount of damages for any breach of the contract.
      • Conditional Remedy Provisions, such as an Indemnification Provision that requires one party to indemnify the other only if certain conditions are met, such as the indemnified party providing prompt notice and cooperating with the indemnifying party's defense.
  • Relationship Management Provisions, such as:
    • Termination Provisions, such as:
      • Unconditional Termination Provisions, such as a provision allowing either party to terminate the contract at any time, without cause, upon providing a specified period of notice.
      • Conditional Termination Provisions, such as a provision permitting termination only in the event of a material breach that remains uncured after a specified cure period.
    • Dispute Resolution Provisions, such as:
      • Unconditional Dispute Resolution Provisions, such as a provision requiring all disputes to be resolved through binding arbitration, without any exceptions or carve-outs.
      • Conditional Dispute Resolution Provisions, such as a provision that requires the parties to engage in good faith negotiation or mediation before commencing arbitration or litigation.
    • Notice Provisions, such as:
      • Notice Requirement Provisions, such as:
        • "Any notice required under this Agreement must be given in writing and delivered by certified mail to the address listed above."
        • "In the event of a breach of this Agreement, the non-breaching party must provide written notice to the breaching party within 15 days of discovering the breach. The notice must include a detailed description of the breach and the actions required to cure it."
      • Unconditional Notice Provisions, such as a provision specifying a single method of delivering notices under the contract, such as via certified mail to a designated address.
      • Conditional Notice Provisions, such as a provision that allows for electronic delivery of notices, but only if certain conditions are met, such as providing a read receipt or obtaining prior consent from the recipient.
  • Declarative Statement Provisions, such as:
    • Governing Law Provisions, such as:
      • Unconditional Governing Law Provisions, such as a provision stating that the contract shall be governed by and construed in accordance with the laws of a specific jurisdiction, without any exceptions or qualifications.
      • Conditional Governing Law Provisions, such as a provision that applies the laws of a specific jurisdiction, except to the extent that such laws conflict with the laws of another specified jurisdiction.
    • Entire Agreement Provisions, such as:
      • Unconditional Entire Agreement Provisions, such as a provision stating that the written contract represents the complete and final agreement between the parties, superseding all prior oral or written agreements or understandings.
      • Conditional Entire Agreement Provisions, such as a provision that allows for the incorporation of additional documents or agreements, but only if they are specifically referenced and attached to the main contract.
    • Severability Provisions, such as:
      • Unconditional Severability Provisions, such as a provision stating that if any term or provision of the contract is found to be invalid, illegal, or unenforceable, the remaining terms and provisions shall remain in full force and effect.
      • Conditional Severability Provisions, such as a provision that allows for the modification or reformation of an invalid, illegal, or unenforceable term or provision, but only to the minimum extent necessary to make it valid, legal, and enforceable.
  • an Annotated Atomic Contract Provision, such as:
    • “Contractor agrees that all work product created under this agreement shall be considered a work made for hire_{(IP Ownership Agreement)}¹, with all intellectual property rights owned exclusively by Client_{(IP Rights Allocation)}², and Contractor hereby assigns to Client any and all such rights_{(IP Rights Assignment)}³. Client grants Contractor a limited, non-exclusive license to use the work product solely for the purpose of performing the services under this agreement_{(Limited Use License)}⁴.” Intellectual Property Provision, Four-Element Permission Provision.
  • ...
• Counter-Example(s):
  • A Contract Definition Statement, because it does not create any rights, obligations, or conditions on its own.
  • A Severability Clause, because it deals with the contract as a whole rather than a specific term.
  • A Force Majeure Clause, because it is a general principle that applies to all obligations in the contract, rather than a specific, indivisible term.
  • A Legal Statute Subsection, because it forms part of a legislative text.
  • A Company Policy Rule, because it pertains to internal company regulations and not to the specific contractual obligations between parties.
• See: Legal Agreement, Contract Drafting, Contract Management System, Annotated Contract Provision Sentence.

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References

2024

• Claude 3
  • An atomic provision is the smallest, self-contained unit of a contractual term that cannot be further subdivided without losing its meaning or coherence. It represents a single, distinct obligation, right, condition, declaration, or statement within a legal document. Atomic provisions can be classified into various categories, such as Performance-Related Provisions (e.g., Obligation Provisions, Permission Provisions, Representation and Warranty Provisions), Relationship Management Provisions (e.g., Termination Provisions, Dispute Resolution Provisions, Notice Provisions), and Declarative Statement Provisions (e.g., Governing Law Provisions, Entire Agreement Provisions, Severability Provisions). They can also be categorized based on their conditionality (e.g., Conditional Provisions, Unconditional Provisions), the number of elements they contain (e.g., Single-Element Provisions, Two-Element Provisions, Many-Element Provisions), and their specificity (e.g., General Contract Provisions, Contract-Specific Provisions).
  • The relationship between atomic provisions and sentence count is many-to-many. This means that a single sentence can contain multiple atomic provisions, and a single atomic provision can span multiple sentences. For example, the sentence "The Seller shall deliver the goods to the Buyer's warehouse, provide an invoice with a detailed description of the items, and ensure that the goods are packaged securely for transport" contains three atomic provisions: (a) delivery of goods, (b) providing an invoice, and (c) secure packaging. On the other hand, a single atomic provision regarding the survival of confidentiality obligations post-termination may span multiple sentences, such as "The confidentiality obligations outlined in this agreement shall survive the termination of the contract. The parties agree to maintain the confidentiality of all proprietary information for a period of five years from the date of termination. This includes, but is not limited to, trade secrets, client lists, and financial data."
  • Sometimes, a mix of one-to-one and many-to-many relationships can be observed within a single provision. For instance, "The service provider shall maintain adequate insurance coverage during the term of this agreement. The insurance policy must include general liability, professional liability, and workers' compensation. The service provider shall provide proof of insurance to the client upon request.” In this example, the first sentence contains a single atomic provision (maintaining insurance coverage), while the second and third sentences together form another atomic provision (types of insurance and proof of coverage).
  • Identifying and categorizing atomic provisions is crucial for effective contract analysis, contract drafting, and contract management. By breaking down complex legal provisions into their constituent atomic components, legal professionals can better understand the rights, obligations, and relationships between the parties involved and identify potential risks, ambiguities, or inconsistencies within the contract.

2023

• Bing chat on: What is a "provision" in a contract agreement? (as opposed to an article or a clause)
  • A provision in a contract agreement is a condition or requirement that must be met by one or more parties to the contract. For example, a provision could state that the seller must deliver the goods by a certain date, or that the buyer must pay a deposit before the contract is effective. A provision can also specify the consequences of breaching the contract, such as penalties, damages, or termination.
  • An article is a larger division of a contract that contains one or more clauses. A clause is a contract section or subsection expressing a specific concept or stipulation. A clause may contain one or more provisions within it. For example, an article could be titled "Payment Terms" and include several clauses that describe how and when the payment will be made, what currency will be used, what interest rate will apply, etc. Each clause may have one or more provisions that detail the conditions or requirements of the payment.
  • Source: Conversation with Bing, 11/7/2023
    1. contract law - What's the difference between a clause, provision .... https://law.stackexchange.com/questions/6324/whats-the-difference-between-a-clause-provision-condition-and-term.
    2. In a contract/an agreement, is there a difference between clause .... https://law.stackexchange.com/questions/73357/in-a-contract-an-agreement-is-there-a-difference-between-clause-article-and-se.
    3. Contract Provision: Meaning, Considerations and FAQs - Investopedia. https://www.investopedia.com/terms/p/provision.asp.

2023

• (Investopedia, 2023) ⇒ https://www.investopedia.com/terms/p/provision.asp
  • QUOTE: A contract provision is a stipulation within a contract, legal document, or a law. A contract provision often requires action by a specific date or within a specified period of time. Contract provisions are intended to protect the interests of one or both parties in a contract.
  • Key Takeaways
    • A contract provision is a stipulation in a contract, legal document, or a law.
    • A contract provision often requires action by a certain date or within a certain period of time.
    • One of the most familiar uses of a contract provision is a bond’s call provision, which refers to a specific date; after this date, the company may recall and retire the bond.
    • A sunset provision is a provision in a regulation stating that sections of the law, or the whole law, expire on a set date.
  • How a Contract Provision Works
    • Contract provisions can be found in a country's laws, in loan documents, and in contract agreements. They also can be found in the fine print accompanying purchases of some stocks.

      For example, an anti-greenmail provision is a type of contract provision that is contained in some companies' charters that prevents the board of directors from paying a premium to a corporate raider to drop a hostile takeover bid.

      In loan documents, a loan loss provision is a type of contract provision that details an expense set aside to allow for uncollected loans or loan payments. This provision is used to cover a number of factors associated with potential loan losses.

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