Key Clauses Every Procurement Professional Should Understand (Before It’s Too Late)

Ever signed a contract… only to find out later that a single sentence cost your organization time, money or perhaps even legal peace?

You're not alone.

Many procurement professionals focus on price, delivery and quantity but gloss over the legal fine print that makes or breaks contracts. The truth? Contracts are not just documents, they’re your protection plan. And buried in that “legalese” are key clauses that determine who’s protected when things go wrong.

Let’s simplify five of the most important clauses you must understand and discuss how to apply them in real-world scenarios.

🎗 Indemnity Clause: A contract term where one party promises to compensate or protect the other from losses, damages or legal claims that might arise due to certain actions or events. It is important to always review who is indemnifying whom and for what. Ideally, ensure that the supplier indemnifies your organization for damages caused by their products, actions or negligence.

🎗 Termination Clause: Explains how and when the agreement can be ended by either party. Do ensure every contract has a clear termination clause, including: termination for breach, termination for convenience, notice period and exit obligations such as return of materials and final payments.

🎗 Force Majeure Clause: A contract provision that frees the parties from liability or obligations when an unforeseeable event beyond their control — like a natural disaster, war or government action — prevents them from fulfilling the contract. In today’s world, we must review this clause carefully. It should cover: natural disasters, pandemics, political unrest, transport bans and so on. Also, ensure it defines notification timelines and the responsibilities of both parties during such disruptions.

🎗 Payment Terms: a section in a contract that clearly states when, how and under what conditions payment will be made for goods or services. This helps to clarify things like: When is the invoice issued? When does the payment countdown begin? Are there penalties or interest on late payment?

🎗 Liquidated Damages Clause: This clause defines predetermined penalties for delays, such as: $500/day late, 1% of contract value per week delayed. It is important to ensure this clause is:

✔️ Fair (not punitive)

✔️ Enforceable in your jurisdiction

✔️ Proportionate to actual risk

As a procurement professional, you're not expected to be a lawyer. But you are expected to know what you’re signing. Understanding these key clauses helps you avoid costly surprises, negotiate better deals and protect your organization from unnecessary risk.

Need procurement specific training? Reach out to support@efemini.com and we'll get you sorted.