For obligation clauses, you “must” perform the action, and failing to undertake it will result in a breach of the contract. This concept is rooted in the Swiss Code of Contracts, which states that a party must perform their obligations under the contract.
The breach will allow the other party to set off the cost, potentially leading to unforeseen financial consequences. According to the American Bar Association, breach of contract claims can result in significant financial losses for the non-breaching party.
Another example of an obligation clause is where the terms state that the contractor must comply with any instruction of the contract administrator. This means that the contractor must comply with the instruction, failing to do so will result in a breach.
With obligations, the performance under the contract must be undertaken. You can spot these by looking at keywords such as “must” or “comply.” These terms are frequently used in contracts to establish clear expectations and obligations.
Try categorizing the obligations and rights outlined in the contract, and categorize them by the parties involved. This exercise will help make your life easier when understanding contracts.
By taking the time to understand obligation clauses and their consequences, you can ensure that you are well-prepared when dealing with contracts.