What is a “Carve-Out” in a Contract?

In a legal contract, a “carve-out” is a provision that exempts or excludes certain items, individuals, or situations from the application of the contract’s terms or requirements.

For example, in an employment agreement, a carve-out may be included to exempt the employee from certain restrictive covenants, such as a non-compete clause, in the event that the employee is terminated without cause. In a real estate contract, a carve-out may be used to exempt certain parts of the property, such as easements or utility rights-of-way, from the scope of the sale.

In the music business, you may enter into a co-publishing deal in which a portion of your catalog is self-published with the help of an admin. This is would be called a co-publishing deal with a “carve-out” for the self-published works.
You may enter a management deal in which the manager only collects a percentage of revenue from any new contracts that are entered during the term of the management agreement.

This would be called getting a “carve-out” for any contracts entered into before the execution of the agreement.

Carve-outs can be used in contracts to address specific issues or concerns that the parties may have, and can be used to limit the scope of a contract’s application in order to make it more acceptable to both parties.

However, it is essential to carefully review the language of a carve-out provision and ensure that it accurately reflects the parties’ intentions and does not create unintended consequences or ambiguities in the contract.