Your business must have a well-written contract with a good boilerplate clause to protect your commercial interests in the event of a dispute. Due to their name, boilerplate clauses can often be overlooked. Parties may assume these clauses have simply been copied and pasted into the contract with no alterations. When signing a contract, you should review the contract, including the boilerplate clauses, to ensure you do not agree to unfavourable terms. This article will address what boilerplate clauses are, provide some examples of them and outline why they are important.
What Are Boilerplate Clauses?
Boilerplate clauses are standard clauses that address general contract issues such as amendments or termination. You usually find boilerplate clauses at the end of a contract’s terms and conditions. They are often under a generic title such as ‘General’. Boilerplate clauses are quite standard and are not usually subject to any negotiations. Many boilerplate clauses provide certainty on matters that you should not necessarily assume. Additionally, they deal with issues that arise if there is a dispute.
Lawyers will generally consistently draft boilerplate clauses in a similar manner. This means that when your lawyer reviews your boilerplate clauses, they may be able to save some time, as they will have previously read those clauses (or very similar clauses).
Common Boilerplate Clauses
Jurisdiction and Governing Law
While jurisdiction and governing law clauses are separate, they are linked and should align. The governing law clause dictates the law that governs how you interpret the contract. For example, under New South Wales law. This is important because laws differ between countries and states. Moreover, a clause might have a particular meaning in one state but a different interpretation in another.
Example of a Governing Law Clause
‘This agreement is governed by the laws of New South Wales.’
If there is a dispute, the parties should agree in the contract which jurisdiction will deal with the dispute. The jurisdiction clause will answer this question. Usually, a court or an arbitrator will deal with the dispute in a jurisdiction within the same state as the governing law.
Example of a Choice of Jurisdiction Clause
Each party irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of New South Wales.
Entire agreement
One of the purposes of a contract is to define the parameters of the agreement you have reached. During negotiations, parties will agree to the terms. Subsequently, the contract will reflect the terms you agree to during negotiations.
An entire agreement clause makes it clear that any other statements, promises, or representations made by the parties outside of the contract, such as in phone calls and emails, are not part of the contract and do not have contractual force.
Force Majeure
The force majeure clause has become one of the most important clauses during Covid-19. Parties refer to this clause to interpret their obligations when they can no longer meet them due to events beyond their control. Force majeure clauses provide circumstances and grounds on which you can terminate or vary a contract if parties cannot perform due to an event outside their control.
‘Force majeure’ is not legally defined, so the parties should specifically define force majeure events within the contract. This definition should outline the circumstances when a party can exercise its right to delay performance, vary or terminate the contract due to that event.
Survival Clause
The survival clause enables specific provisions of a contract to remain valid after the termination or expiry of a contract. These are useful if you wish to have something persist after the contract’s termination. For example, suppose you want the confidentiality obligations to remain after the contract has ended.
Example of a survival clause
The confidentiality clause will survive termination or expiry of this Agreement.
Other Notable Boilerplate Clauses
Some other important boilerplate clauses include:
- assignment and novation clause that sets out whether the obligations in the contract can be assigned or novated;
- counterpart clauses explain that parties can sign separate versions of the same document, and together they form one agreement. This is useful when the parties cannot all meet in person to sign the one document;
- a severance clause usually explains that if clauses are void and unenforceable, parties can remove those clauses from the document without affecting the validity of the rest of the document;
- the relationship of the parties clause sets out what relationship the parties do not have. For example, this clause may state that you do not intend the contract to form an employment or agency relationship between the parties;
- a variation clause sets out the mechanisms by which parties can vary the contract. For example, parties may vary the contract in writing;
- the interpretation clause sets out the rules which apply to contract interpretation; and
- the notices clause sets out the procedure by which the parties may communicate with each other about any aspect of the contract (whether trivial or significant).
Why Are Boilerplate Clauses Significant?
Despite being at the end of a contract, you must not ignore boilerplate clauses. Australian courts are generally inclined to interpret contracts as they are written. If the boilerplate clauses spell out procedures and you do not follow them, a court is unlikely to be lenient.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
Key Takeaways
Boilerplate clauses have a purpose in a contract, and you should not overlook them. These clauses often come into effect when parties are in dispute. Therefore, you must not copy them from other generic agreements. Drafting well-written clauses can prevent issues in the event of a dispute.
If you need help with a boilerplate clause, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Boilerplate clauses are usually at the end of a contract’s terms and conditions. Many boilerplate clauses provide certainty on matters and deal with issues arising from a dispute.
These clauses are important as they provide clear procedures in the written contract and can save time and money arguing over disputes.
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