If you have ever read through a contract, you will probably have noticed some clauses, usually towards the back of the contract, that seem, well, dull and pointless. Most of these clauses are fairly standard (hence the term boilerplate), and they are not usually commercially sensitive or subject to a lot of negotiations. Rest assured, boilerplate clauses serve a useful and necessary function in a contract.
Generally speaking, boilerplate clauses help to define and clarify the relationship between the parties and the bigger picture in which the contract will operate. They may appear unnecessary, but they help to provide certainty if there is ever a dispute between the parties.
This series of articles will provide a brief overview of the meaning and legal effect of the most common boilerplate clauses you will come across. While you may not end up liking them more, you will hopefully find that they are not quite the contractual dead weight you thought they were!
Jurisdiction or Governing Law
A contract governs the commercial relationship between the parties to it. The commercial effect of the clauses can vary significantly depending on which jurisdiction the contract is interpreted in. This is especially relevant where parties are from different states or countries, which means that there may be several legal systems that could apply to the contract. A jurisdiction clause clearly states which laws the parties have agreed to abide by. Similarly, the jurisdiction clause provides certainty as to which courts will preside over any dispute that may arise between the parties.
As the name suggests, this clause attempts to define the parameters of an agreement. It is a declaration that the agreement, signed by both parties, represents the entirety of the agreement. When negotiating contracts with clients or suppliers, certain informal correspondence will normally take place before and even during negotiations, such as phone conversations, email threads and meetings. After this, the lawyers will negotiate the Agreement’s finer details before each party signs the dotted line, agreeing to be bound by the Agreement’s terms.
This contract might be quite distinct from the initial agreement, or the details of the conversations you and the other party have had in the past. As a result, an ‘Entire Agreement’ clause removes any doubt as to the terms of the contract and eliminates the possibility of either party relying on previous representations when enforcing the contract. So it is essential to ensure that everything that you have discussed is reflected in the terms of the contract. If there is a dispute, you cannot rely on a representation that was previously made, even if it was intended to be a material aspect of the deal.
Force majeure is a French term meaning “superior force”. A Force Majeure clause states that if there is an unexpected event that is out of the parties’ control and disrupts the ability of one or all parties from performing their part of the contract, the parties are excused from their contractual obligations.
A Force Majeure clause should define as precisely as possible the events which will trigger a release of contractual obligations. Such events are usually external to the parties, cannot be anticipated at the time of signing the contract and are unavoidable. Common examples are natural disasters or “acts of God”, war or invasion of foreign enemies, government sanctions, blockades and embargoes, interruption or failure of electricity, just to name a few.
If an event occurred that prevented a party from performing its obligations under the contract, the narrow view of the common law would deem it a ‘frustration of purpose’ and impose a penalty for the lack of performance.
A Force Majeure clause provides the parties with certainty that if they are unable to perform their contractual obligations because of a major event that makes the performance of the contract impossible, both parties will be excused from performing their contractual obligations without penalty. A Force Majeure clause excuses parties from performing their contractual obligations without penalty if they are prevented from doing so because of a major event.
In a supply agreement, for example, if a blockade prevents the supplier delivering the goods, the customer can invoke the Force Majeure clause and terminate the contract without penalty.
To read more about Boilerplate Clauses, click here for Article 2. If you have any questions about this article or about drafting a contract generally, please get in touch! Our experienced contract lawyers would love to hear from you.