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? These clauses are known as ‘Boilerplate clauses’, which deal with the way the contract operates and how the parties should deal with the agreement and each other. 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.
Although boilerplate clauses are standard some 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. This article lists 3 common boilerplate clauses and explains their purpose.
1. Entire agreement clause
One of the most common boilerplate clauses that can be seen 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 and information such as emails or other forms of communications. Also, it limits the liability for misleading statements of fact, otherwise known as misrepresentation claims and the financial liabilities that follow. 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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2. Counterparts clause
Another common boilerplate clause is the ‘counterparts’ clause. For a contract to be legally binding it must be signed by all the parties. 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. This clause would prevent 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.
3. Notices clause
A third common boilerplate clause is a ‘notice clause’. A notice clause specifies how a notice under the contract, such as a notice for possession, can be served and when it would be deemed to have been received by the receiving party. In addition to the statutory methods of service, a notice clause can stipulate alternative ways to serve a notice such as by email or service on an agent. Conversely, a notice clause can also limit the way a notice is served.
A notice 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 notice clause would identify when a notice would be considered as 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 part of the agreement.
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