Business contracts do not last forever. Many of them include a specific date when the contract ends, whether it is an employment contract or part of a partnership agreement.
However, terminating the terms of a contract is not always in the best interest of the business. There are ways to make conditions of a contract continue to apply, even after the contract ends. Most California business owners are familiar with survival clauses, but they must understand how these clauses work and when to use them.
How do survival clauses work?
If a section of a contract has a survival clause, that section persists and legally binds the parties even after the contract expires – or the parties terminate it. Business owners often use survival clauses in confidentiality agreements.
Ensuring that these agreements remain legally binding for a time after the contract expires can help business owners proactively protect their company, should they face any changes regarding the contract.
Survival clauses are critical when business owners disclose their intellectual property
Business owners can add a survival clause to their contract when they want specific warranties or liabilities to persist. However, since these clauses are commonly used with confidentiality agreements, these clauses are generally essential whenever intellectual property is involved.
Survival clauses can help protect intellectual property when:
- Businesses enter into a new deal;
- Employers hire or terminate an employee;
- Businesses create a new partnership; or
- Businesses engage with manufacturers.
Remember, the statute of limitations still applies
Creating a survival clause can allow the terms of a contract to continue for a time. However, even this clause is subject to a statute of limitations. That is why it can be beneficial for business owners to consult an experienced business attorney to craft an effective survival clause that protects their business and prevents serious contract disputes in the long-term.