Statements: Overview, definition, and example
What are statements?
Statements in a contract generally refer to written records, reports, or disclosures provided by one party to another. Depending on the context, these may include financial statements, account statements, compliance certificates, or progress reports. A statements clause outlines what types of statements must be delivered, how often, and in what format.
Why are statements important?
This clause ensures transparency and ongoing accountability between the parties—especially in financial, service, or performance-based contracts. It gives one party (often a lender, investor, or client) regular visibility into the other party’s operations, financial health, or contractual performance. Missing, inaccurate, or delayed statements can be grounds for breach or default, so this clause helps enforce regular communication and documentation.
Understanding statements through an example
A borrower enters into a loan agreement that requires it to submit quarterly financial statements to the lender. The statements clause specifies that these must include balance sheets, income statements, and cash flow statements prepared in accordance with GAAP. If the borrower fails to deliver the statements on time, it could trigger a default under the agreement—giving the lender the right to accelerate the loan or withhold future funding.
Example of a statements clause
Here’s how a statements clause may look like in a contract:
"The Borrower shall deliver to the Lender, within forty-five (45) days after the end of each fiscal quarter, unaudited financial statements, including a balance sheet, income statement, and statement of cash flows, and within ninety (90) days after the end of each fiscal year, audited financial statements prepared in accordance with GAAP by an independent accounting firm."
Conclusion
The statements clause creates a structured reporting obligation that supports transparency, oversight, and compliance. Whether you're monitoring financial condition, service performance, or contractual milestones, this clause helps ensure you receive the information you need to make informed decisions or take action if problems arise.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.