Boilerplate Clauses in Contract

by Haekal

There are several practical terms used in daily communications at corporate law firms, this article will give a brief explanation of the Boilerplate Clauses term in Contract. Boilerplate terms refers to standardized language in a contract that usually appears at the end of the agreement (often in a section titled “miscellaneous” or “general terms”). While boilerplate provisions are common clauses in a contract, they should always be checked carefully and tailored to the particulars of the situation as they will address important issues that will be determinative of the parties’ rights with respect to the business contract. Outlined below are examples of common boilerplate provisions counsel will encounter in contracts:

The Third Parties Rights. In most commercial contracts, the parties agreed to exclude any rights of third parties to enforce the agreement. When acting for a customer, please ensure the customer’s corporate entities that are impacted by the terms of the agreement are named as additional parties along with the customer.

Assignment and Sub–Contracting. Please consider whether there is urgency for either party to assign the contract with or without consent, and whether to include an appropriate standard for consent (e.g. at the other party’s sole discretion or consent not be unreasonably withheld). Even if consent is required, the parties may agree to exclude certain assignments for which consent will not be required, such as when there is a change in control of a party or a sale of all or most of a party’s assets.

Force Majeure. A critical provision that sellers should consider including in the business contract is what is known as a “force majeure” clause. This is a provision in the contract that lists a series of events that are beyond the reasonable control of a party, the occurrence of which will excuse performance by a party for as long as the event occurs and, usually, for a reasonable period of time thereafter.

Applicable Law. In the event of a dispute, a choice of law provision determines which state’s legal rules and laws will be applied in the lawsuit. Choices of law provisions are particularly important when the transaction involves the crossing of state lines, both physically and electronically.

Dispute Resolution. Parties to contracts are often in ongoing relationships. Immediate court proceedings in the event of a dispute may not be in the best interests of either party. The parties may wish to consider an alternate dispute resolution process that will be managed and escalated by the parties themselves, such as arbitration.

Waiver. A waiver provision allows the parties to forego the right to sue for breach of a particular provision of the agreement without giving up any future claims regarding the same or any other provision in the agreement. For provisions the parties do not wish to be waivable, counsel should include clauses addressing non-waiver and no variation without written consent.

Term. The term provision sets out the amount of time that the agreement will govern the parties’ relationship. Agreements that intend to terminate on the consummation of a one-time transaction may not require a termination provision. When drafting a termination provision, first define the length of the agreement, which may be time-based, project-based or dependent on a related agreement.

In conclusion, Lawyers and/or legal counsel must be aware that any provision in a contract is subject to negotiation, including “boilerplate” clauses, the failure to use these provisions properly can harm the client interest.