Contracts may be lengthy and include clauses that might not speak to the heart of the agreement, which begs the question, what are these clauses, and why do they form part of the contract?
Such clauses are known as 'Boilerplate clauses' and deal with the way the contract operates, the contractual obligations under the contract and how the contracting parties should deal with the agreement and with each other. Common boilerplate clauses include:
- Force majeure clause
- Jurisdiction clause
- Governing law clause
- Third party rights clause
- Arbitration clause
- Waiver clause
- Assignment clause
- Language clause
- Contractual lien clause
- Non reliance clause
These boilerplate clauses may not form part of the commercial transaction, but are included as a form of protection for the parties and add certainty as to the rights and obligations under the contract. Not all boilerplate clauses are always added to the same document - in many cases, the inclusion of the relevant clause into a contract is considered on a case-by-case basis. For example, a contract without an international dimension may be able to forego a choice of law clause.
Although boilerplate clauses are standardised clauses, many of them can change from one contract to another. For example, a governing law clause in one contract can nominate the laws of England and Wales as the governing law, while another nominates the laws of New York as the governing law. A jurisdiction clause determines the legal venue in which a dispute that arises between the parties will be heard and determined. Naturally, this boilerplate clause will differ from contract to contract, depending on the specified circumstances of each.
This article sets out 3 common boilerplate clauses and explains their purpose.
Entire Agreement Clause
One of the most common boilerplate clauses is an entire agreement clause. This clause ensures that a party can only rely on the terms set out in the agreement and any other document referred to as forming part of the agreement. Accordingly, a party cannot claim reliance on pre-contract discussions, representations and information contained in emails or other forms of communication.
An entire agreement clause also limits liability for misleading statements of fact, otherwise known as misrepresentation claims and the financial liabilities that can follow these. If the contract does not have an entire agreement clause the parties run the risk of side agreements through representations that were not intended to form part of the agreement.
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Another common boilerplate clause is the counterparts clause. For a contract to be legally binding, it must be signed by all the parties involved. However, it is not always practical for the parties to sign the same copy of the agreement. A counterpart clause allows the parties to sign separate or multiple copies of the agreement, ensuring that they collectively form the executed agreement.
A counterparts clause prevents a party from objecting to the validity of a signed copy or counterpart. It is not necessary for the parties to sign the same or original copy of the agreement as the addition of the counterpart clause shows the parties intend to be bound by the agreement as they have signed separate copies of the same agreement.
A third common boilerplate clause is a notices clause. A notices clause specifies how a notice under the contract, such as a notice for possession or a notice of termination, can be served and when it will be deemed to have been received by the receiving party. In addition to the statutory methods of service, a notices clause can stipulate alternative ways to serve a notice such as by email or service on an agent. Conversely, a notices clause can also limit the way a notice is served.
A notices clause will specify where the notice should be delivered, such as the head office address of a company or a special email address. In addition, a notices clause will identify when a notice is considered received, saving the serving party from the trouble of proving receipt by the receiving party. This clause is especially important if the serving party is making a claim to enforce the notice if the recipient does not comply with the notice.
In conclusion, although boilerplate clauses add length to the contract, they are quite important to include. They clarify the obligations and rights of the parties and they add certainty to the way the parties deal with each other.
If boilerplate clauses are excluded from the contract, uncertain terms would be interpreted differently by each party, causing more conflict. For example, if the contract does not include an entire agreement clause one party might rely on a document that the other party does not wish to form a part of the agreement, leading to conflict and a potential dispute.
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