Boilerplate Clauses in Contracts: Avoiding Unintended Consequences

Boilerplate clauses are often simply cut and pasted from one agreement to another. These “standard” provisions conceal significant legal and business implications that can produce unwanted future results if not tailored to specific circumstances of the transaction. Such boilerplate provisions are often placed into a miscellaneous category. They may include, among other things, choice of forum, choice of law, force majeure, liquidated or limitations of damages, dispute resolution, assignment, notice, merger, and amendments.

Best practices necessitate negotiating and drafting such clauses, as well as others, in anticipation of future disputes. Automatically transplanting a boilerplate provision from an existing contract or form into a new agreement can unintentionally defeat the contractual intent of the parties and cause significant losses. Anticipating potential pitfalls of boilerplate provisions can avoid litigation when a future dispute arises.

It is standard practice to include a number of general provisions in any legal document, and given their common use and function they are referred to as boilerplate clauses. It is common practice to place these more fundamental legal clauses at the back of the document while ‘interpretation’ boilerplate is usually included at the front.

Boilerplate clauses are more general in nature than other clauses in the body of the contract and they normally relate to legalities of the contract rather than the particular transaction. There can be a temptation for a client’s eyes to glaze over once they see such provisions. It is fair to say that sorting through such complications is the reason a lawyer is hired in the first place.

The importance of these clauses should not be underestimated. Clients often demand short, succinct documents and they may see such provisions as ‘unnecessary”. Judicious use is required, but the elimination of boilerplate would not be wise. Deleting any boilerplate clauses should be throughly and carefully considered with the risks and benefits being carefully weighed.

Some common boilerplate clauses are:

  • This is the entire agreement between the parties in relation to its subject matter and it supersedes all previous written or oral negotiations, promises and understandings.
  • No modification of the recorded terms will be binding unless it is in writing and signed by each party.
  • If a court considers any provision unlawful, invalid or unenforceable that will not affect the validity and enforceability of the remaining provisions.
  • If the document is signed in counterparts, each is deemed an original and together they constitute one instrument.
  • Each party must do all things required to implement the provisions of the document and to give effect to the parties’ stated intentions.
  • Each party is to pay its own legal costs related to preparing and signing the document.
  • Nothing in the document constitutes a partnership among the parties or authorizes any party to act as agent or to bind another or contract in another’s name.
  • The assignment (changing ownership) of the rights and obligation are restricted unless written consent is given.
  • Successors (such a future owners) will be bound by the relevant undertakings and obligations, but they’ll also enjoy the same rights.
  • The other party must execute any documents required to give effect to the undertakings in the document.
  • The rights, powers and remedies set out in the document are in addition to any existing rights.
  • Failure to take action does not mean a party has consent to another party’s actions nor does it prevent a party from taking action later.
  • Rights will only be waived if that waiver is in writing.
  • A certain jurisdiction’s laws are selected to govern the document.

Commercial leases and purchase and sale agreements are examples of the types of contracts where a qualified attorney can assist a client to strategically use boilerplate clauses, and to identify the pitfalls in using standard contract clauses without adapting them to the unique circumstances of the deal at hand.

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