Definition: A provision is a legal condition embedded into a contract. In other words, they are legal parameters included in an agreement.
What Does Provision Mean?
It is not that easy to differ between a clause and a provision in a legal document. Legal experts are trained to understand this but for untrained eyes provisions might look like clauses and vice-versa. Nevertheless, provisions are established conditions stipulated in a contract (whether written or oral) the course of action being taken in specific scenarios. A provision describes what would happen or what would not happen in different situations that may arise during the contract’s life spam.
These provisions are contained within the contract’s main clauses or sub-clauses and they normally very specific. For example, a job contract’s provision might state that in the occurrence that the employee misses three (3) straight days of work with no adequate justification the contract will be ended unilaterally and there will be no room for a compensation claim on behalf of the worker. These kinds of provisions are established to set up some specific rules regarding a particular clause in the contract.
Here’s a business example of a contract’s provision.
Contract Provision Example
A construction company entered a regular supply contract with a plastic pipe manufacturer. In order to secure a low price, the construction company decided to grant a 1-year exclusive contract to this supplier for all the water pipes required for the building they are currently working on.
The contract had many different clauses regarding prices, delivery dates and quality conditions and the construction company wanted their lawyers to write an air-tight contract with no room for abuses or negligence on the side of the supplier, since there’s an exclusivity clause that can have a negative impact if the company is not able to supply the goods punctually.
In order to avoid this, the lawyers included a provision into the delivery date clause that stipulated the following: “If at any given point the supplier misses a delivery date in two consecutive occasions, the contract will be resolved with no need of justification or previous notification from the company” (In this case, the construction company). By including this provision, the company can protect itself from recurring late deliveries that might affect their project’s outcome.