6 Things You Can’t Forget When Writing Out a New Customer Contract

The drafting of a client contract is not only an administrative chore but rather an absolute need for the safety of company operations. These contracts serve as the framework for professional contacts and determine the nature of the connection that exists between companies and the customers that they serve. These contracts are required to include a number of crucial elements in order to guarantee that they are comprehensible, to safeguard the interests of all parties concerned, and to provide a solid groundwork for a successful commercial partnership.

Identification of Parties Involved

It is of paramount importance to explicitly identify all parties involved in the contract. This includes full names, company titles, and relevant contact information. Proper identification establishes the legal entities bound by the agreement’s terms and conditions. It ensures clarity in communication and provides a clear point of reference for any subsequent dealings or clarifications. By being meticulous in this initial step, businesses can prevent potential confusion or disputes in the future, ensuring that every stakeholder is aware of their role and responsibilities within the agreement.

Incorporate ASC 606

When drafting a new customer contract, it’s crucial to stay updated with the latest financial reporting standards to ensure both clarity and compliance. One of the most crucial aspects is to incorporate ASC 606. Now, one might wonder, what is ASC 606? Simply put, ASC 606 is a revenue recognition standard that dictates how and when a business recognizes revenue from its contracts with customers. By incorporating the principles of ASC 606 into your contracts, you provide a clear basis for revenue recognition that aligns with universally accepted practices. This not only reinforces the transparency and reliability of your agreements but also ensures that all parties have clear expectations regarding financial transactions.

Payment Terms and Conditions

Every commercial agreement absolutely has to provide a detailed explanation of the payment structure, including how much will be paid, when it will be paid, and under what circumstances. It should specify payment amounts, due dates, approved payment methods, and any possible penalties or interests for late payments. It should also explain any potential penalties or interests for late payments. In addition, there should be no ambiguity on the terms and conditions of refunds, advance payments, or any other arrangements for unforeseen circumstances. All parties involved are provided with clear expectations when the financial arrangements are transparent, which helps avert possible problems. By adhering to these rules, you will assist in preserving a happy business relationship, which will ensure trust and dependability for the duration of the partnership.

Termination Clauses

Every contract should detail the conditions under which either party can terminate the agreement. This might include breach of contract, failure to deliver, or other stipulated circumstances. Clearly defining these termination clauses helps set boundaries and expectations for the working relationship. Moreover, it ensures a mutual understanding of the repercussions and processes involved should things not go as planned. Providing a clear exit strategy assures all parties that there’s a structured way to end the relationship if necessary, mitigating potential conflicts and ensuring a smooth transition for both sides.

Confidentiality and Non-Disclosure Agreements

If the nature of the contract involves sharing proprietary or sensitive information, a confidentiality clause is crucial. It binds the parties from disclosing or using the shared information for any purpose other than what the contract specifies. Such clauses ensure that business secrets and sensitive data remain protected, preserving the competitive edge and trustworthiness of the involved parties. Breaches of this clause can lead to legal repercussions, and hence, it is essential for all involved to understand its gravity. By integrating this provision, both parties exhibit a commitment to mutual respect and professional integrity.

Dispute Resolution Mechanisms

Incorporate a clear mechanism to handle potential conflicts within the contract. Whether it’s through mediation, arbitration, or even court procedures, this section offers a roadmap to navigate disagreements that might arise during the agreement. By laying down this pathway beforehand, businesses can often resolve conflicts faster, saving both time and resources. Furthermore, having this mechanism in place demonstrates foresight and a commitment to maintaining a professional relationship, even in the face of disputes. It helps in ensuring that both parties are on the same page about how to address any contentious issues that can emerge.


Constructing a comprehensive customer contract is akin to building a strong bridge. It needs to bear the weight of mutual business expectations and weather the storms of potential disagreements. By ensuring that essential elements like clear identification, scope definition, transparent payment conditions, exit strategies, confidentiality clauses, and dispute resolution pathways are present, businesses can solidify their customer relationships, fostering growth, trust, and enduring collaboration.

suraj verma

As a highly skilled and experienced content writer, I have a passion for creating engaging and informative content that connects with audiences and inspires them to take action. With over 1 year of experience in the industry, I have honed my writing skills to craft content that is both effective and SEO-friendly.

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