Boilerplate Clauses and Their Importance in Contracts

What are boilerplate clauses and how are they important to a contract?

Boilerplate clauses or miscellaneous clauses are the sections of a contract that usually occupy its last few pages. This term refers to the relatively standard clauses in contracts which are often ignored and overseen by parties when entering into a contract.

Why are these often overseen?

Business owners usually spend most of their time negotiating the precious clauses of their business contracts whether it be the obligations, payment structure, or milestones. Once these important terms are finalized and both parties are satisfied, they hardly take the time to glance at what the final few clauses are just above their signatures.

Why are they important?

Boilerplate clauses might not be commercially sensitive or as exciting as their counterparts, but nevertheless, they perform a valuable purpose in a contract. These clauses are the ones that clarify the relationship between the contract parties. This is of extreme importance and provides certainty in the event any of the terms of the contract are ever disputed. These provisions are generally enforced by courts as written and are in fact substantive and can determine the outcome of a case.

Examples of boilerplate clauses.

Some of the topics in a contract which are covered by these boilerplate clauses include:

• Choice of governing law and choice of forum: which jurisdiction/ court will proceedings lie in case of dispute and which law shall govern these proceedings.
• Third party beneficiary rights – whether any third-party shall be a beneficiary of this contract.
• Capacity – in what capacity have the parties entered into the contract i.e. whether as independent contractors or is the intent to create a principle-agent relationship.
• Notices – details of both the parties where notices in connection with the contract should be sent.
• Modification of agreement – what will be construed as a proper modification of the contract – whether written or oral, signed by both parties etc.
• Assignment – Can the contract be assigned to someone else by either party.

On a review of the above, it is obvious that these clauses can have an enormous effect on the outcome of a case if a contract ever goes into dispute.

Therefore, it is highly recommended that all business owners get their contracts and agreements vetted and reviewed by a capable business attorney prior to signing them. It is also suggested that business owners take advice from a business attorney to review their existing agreements and contracts to mitigate any effects of damaging boilerplate clauses in the event the contracts go into dispute.