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Legal Audits (Vol 3, Pt 2) – Parties & Purpose

Patrick Lim
Partner at Raj, Ong & Yudistra

Proceeding with the breakdown of the types of clauses that you should look at when carrying out legal contract audits, we shall take a look at the first 2 types of clauses – Parties and Purpose.

Parties

When reviewing the “Parties” item on the contract review checklist, you should consider the following:

  1. Identify the parties to the contract: Confirm that the parties to the contract are properly identified, including their legal names and addresses.
  2. Confirm that the parties are authorized to enter into the contract: Make sure that the parties to the contract have the legal authority to enter into the contract. This may involve reviewing the parties’ articles of incorporation or other corporate documents, or confirming that the parties have the necessary licenses or permits to conduct the business covered by the contract.
  3. Check for any required signatures: Confirm that all necessary parties have signed the contract and that the signatures are valid.
  4. Review any legal representatives: If a party to the contract is represented by legal counsel or other agents, confirm that the representation is properly documented in the contract.

Overall, it is important to ensure that the parties to the contract are properly identified and authorised to enter into the contract, and that the contract is properly executed. This helps to ensure that the contract is enforceable and that the parties are held accountable for their obligations under the contract.

Purpose

The next item on the contract review checklist is “Purpose.” These are usually found in the recitals, or in the first few clauses, sections or articles of the agreement. When reviewing this item, you should consider the following:

  1. Understand the purpose of the contract: Make sure that you understand the purpose of the contract and what the parties are agreeing to do under the contract.
  2. Confirm that the purpose aligns with the company’s business objectives: Ensure that the purpose of the contract aligns with the company’s business objectives and that the contract is consistent with the company’s overall strategy.
  3. Check for any unintended consequences: Review the contract to ensure that it does not create any unintended consequences or expose the company to unnecessary risks.

Overall, it is important to understand the purpose of the contract and to confirm that it aligns with the company’s business objectives. This helps to ensure that the contract is consistent with the company’s overall strategy and that it does not create any unintended consequences or expose the company to unnecessary risks.

Our next article will look at clauses relating to the tenure and the termination of contracts.

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