Boilerplate clauses refer to the relatively standardised clauses in mostly business-to-business contracts and are found towards the end of an agreement. Parties usually don't spend any time negotiating these, preferring to focus on the more 'substantial' clauses such as payment, termination and limitations of liability. While perhaps not as commercially sensitive as other terms in a contract and consequently often overlooked, they nevertheless perform a valuable and useful purpose in a contract.
There are certain clauses that can be reused or appear in almost every contract, such as a governing law clause and force majeure clause. It's important to know both their meaning and significance. In some cases, they can have a decisive impact on the outcome of a dispute between the parties.
What are boilerplate clauses?
Which clauses are boilerplate?
There are some common boilerplate clauses such as entire agreement, no waiver clauses, force majeure clauses and governing law clauses.
An entire agreement clause (also known as the merger or integration clause) is used to prevent the parties from being liable for any understandings, agreements, or representations and warranties other than those expressly set out in the agreement. This is generally used to make sure that all of the obligations are recorded in one written agreement. The parties will also want to make sure that any representations and warranties made prior to the contract (such as sales pitches, marketing content and pre-contractual statements) cannot subsequently be used to find it liable for misrepresentation.
For example, if there were any pre-negotiations between the parties then anything agreed prior to the main agreement being signed would not form part of the agreement, unless they were expressly stated in the agreement. This is to prevent one party from relying on things said or done prior to signing the agreement.
No waiver clause
This clause tries to preserve all rights of the parties from being waived (ie given away), especially by delay in exercising them. It essentially prevents the non-compliant party from arguing that the other party waived its rights because it excused non-compliance by not acting. However, later words and actions of the party may prevail over this clause.
With this clause, the parties agree on the way to deal with non-performance of the obligations under the contract when this is due to events beyond a party's control.
The idea is that no party to an agreement should be held to its performance obligations to the extent that performance is prevented by certain extreme circumstances outside that party's control. This clause can have different effects depending on the way it is drafted.
Essentially it seeks to try and ensure the parties can't be liable for not fulfilling the contract due to acts outside of its control.
A typical list of force majeure events might include war, riots, fire, flood, hurricane, typhoon, earthquake, lightning, explosion, strikes, lockouts, slowdowns, prolonged shortage of energy supplies, and acts of state or governmental action prohibiting or impeding any party from performing its respective obligations under the contract. So if, for example, a hurricane occurred that shut down a port, the seller planning to ship its goods through that port would not be liable for late delivery of the goods. These types of events are often called 'Acts of God'.
For more information, read Force majeure.
Governing law and jurisdiction
The governing law of a contract dictates which legal system will answer questions about aspects of the contract, such as its interpretation, enforceability, termination, implied terms, and remedies in the case of a breach.
The jurisdiction clause determines which courts will hear the case if there were any disputes. For example, this could be the courts of England and Wales or the courts of Scotland.
For further information, read Jurisdiction and international contracts.
Please note that these are a general interpretation of some boilerplate clauses, and how a court will interpret them will entirely depend on their wording and not only on the heading above.
What steps can you take to make sure these clauses are appropriately included in your contract?
You can make sure that including the relevant clause and its scope is appropriate in the context of the transaction. You should note that not every single clause should be present in every contract. Consider what are the different positions without and with the relevant clause and how that benefits you in this transaction.
It is not unusual for a boilerplate clause to be at the centre of a litigation or to have a decisive effect on the outcome of a dispute between the parties. Ask a lawyer if you would like to discuss these clauses in light of your particular circumstances.