Have you checked your boilerplate clauses? Don’t end up in hot-water!
‘Boilerplate clauses’ are those that usually feature towards the end of a contract. They are legal-sounding, sometimes difficult to understand and may appear to have little relevance to the outcome you’re looking to achieve. They cover the boring stuff.
Poorly-drafted boilerplate clauses can result in disputes down the line. Sometimes costly and damaging ones. That’s why you need to review them carefully.
Why are they called ‘boilerplate clauses’?
The term ‘boilerplate’ has an interesting etymology – to some, at least! Originally, it referred to the rolled high-quality sheet steel used in the manufacture of boilers. In the late 1800s the term began to be applied to the steel printing plates on which reusable text – such as for advertisements or syndicated columns – were embossed. Some companies even sent out press releases as boilerplates because they had to be printed as written and without changes. Over time, the term came to describe text or other material of a standard or routine nature.
The danger with anything standard or routine is that it is regarded as unimportant and ignored. None more so than boilerplate clauses in commercial contracts!
So what areas do they cover?
Usually it’s the areas we give the least thought to. This list of boilerplate clauses is not exhaustive and, hopefully, not too exhausting:
- Assignment: Can the contract be ‘sold on’ to someone else? If so, can both parties do that or just the party that drafted the contract? Would you really want the other party to be able to assign the contract to any third party or would you want some control over that? Similar considerations apply to subcontracting.
- Confidentiality: Even if you haven’t come up with a novel product or a cure for the common cold, the chances are that you won’t want the other side to discuss commercially sensitive information with your competitors or blab your trade secrets on Facebook.
- Entire Agreement: You want ‘certainty’ in a contract, so it’s quite usual to see a clause which says that the contract is the whole of the agreement between the parties, that it supersedes any previous agreement or understanding and that neither you nor the other side rely on any representation made before the contract was signed. That’s all well and good. But if there are any documents or emails that are important to you and could have a bearing on how clauses of the contract are interpreted, you’ll need to make sure that these are attached as appendices and referred to in the contract itself. Similarly, you can’t rely on anything that the other side tells you unless it’s written into the contract. If the guy you’re dealing with says ‘I know it’s not in the contract, but we’re quite happy to accept payment in Bitcoin…’ don’t accept that! You must get it written into the contract if you want to pay with cryptocurrency!
- Force Majeure: Don’t speak French? Not a problem. This concerns what happens if you can’t fulfil your end of the bargain because of something entirely out of your control; for example, heavy snow presents you from delivering and installing a new server in a major firm of accountants 200 miles away. But you wouldn’t want this to apply to your buyer’s failure to make a payment… would you?
- Jurisdiction: So, things turn foul and it’s off to court. But where’s the court? You can insist on having legal disputes dealt with only by the English courts. But what if the other party is now living in Panama? You may get your judgment in England but whether you could enforce it in Panama is another matter. If the other party enjoys a jet-set lifestyle, you’ll want to pay particular attention to the jurisdiction clause.
- Law: English law is what you want – unless you live Scotland. ‘UK law’ doesn’t exist. Sounds simple enough. But what if you’re dealing with a company based in Beijing whose terms and conditions are subject to Chinese law? You could ignore that and hope for the best. If there’s a dispute, it may be that some clauses in the contract wouldn’t be interpreted quite in the way that you would expect. For all you know, Chinese law may imply a whole series of terms into the contract which you were completely unaware of at the time that you signed up. Always seek professional advice if you’re asked to sign a contract that’s not based on English law, particularly if the value involved is significant to you.
- Limitation of Liability: Get this wrong and it could potentially land you in deep (and hot) water. It’s not about plucking a figure out of the air and limiting your liability to that amount. It’s about carefully crafting the wording of the clause to cover as many areas of loss as you wish to in a way that convinces a court that your clause is ‘reasonable’. And that’s no mean feat. To make things even more complicated, different rules apply depending on whether you’re dealing B2B or B2C. Probably the worse thing you could do is to pull an exclusion clause straight off the internet.
- Survival: What happens when the contract ends? Is it as though it had never existed? Not if you’ve exchanged confidential information or there is a non-competition clause for example. A well-drafted survival clause will make clear which aspects of the contract continue in force following its termination and those that are well and truly over.
- Termination: You need the option of getting out of the contract if the other side really isn’t playing ball or you get wind of their being in serious financial difficulty. But would you want them to be able to terminate a contract to supply you with microchips because you’re a day late paying? Doubtful. Termination provisions are another example of a boilerplate clause that requires careful consideration and wording.
You ignore boilerplate clauses at your peril. They should not be regarded as ‘standard’ and ‘unimportant’. Like any other clause in a commercial contract, boilerplates need to be drafted carefully to reflect the outcome that you seek and to ensure that the risks are minimised or, at least, understood. Give as much attention to boilerplate clauses as you do to the other terms of the contract and, whilst you may not necessarily end up with a watertight contract, the chances of ‘springing a leak’ will be reduced greatly.
Technical Terms provides in-depth legal advice on drafting commercial contracts. If you require further information, please contact us on 01904 899794.