What Are Boilerplate Clauses and Why Are They Important?

Due to their name, boilerplate clauses can often be overlooked. Parties may assume these clauses have simply been cut and pasted into the contract with no alterations. When signing a contract, it is important to make sure that you deal with key risks so that you do not agree to unfavourable terms. You usually find boilerplate clauses at the end of contracts, but this certainly does not mean they are not important. This article will address what boilerplate clauses are, provide some examples of them and outline why they are important.

What Are Boilerplate Clauses?

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 should not necessarily be assumed. Additionally, they deal with issues which arise if there is a dispute. 

Common Boilerplate Clauses

Jurisdiction and Governing Law

While two separate clauses, these two are linked and should align. The ‘governing law’ clause dictates the law that applies to govern the contract, such as, New South Wales law. This is important because laws differ between countries and states. If there is a disagreement, it must be clear under which law you will interpret the contract.

If there is a dispute, the parties need to have agreed 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. 

Entire agreement

One of the purposes of a contract is defining the parameters of the agreement you have reached. Often, negotiations will have taken place, perhaps via phone calls and emails between the parties, to agree on the terms. A contract is then drafted and signed to reflect what has been agreed.

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 of this Covid-19 era. Parties have looked to this clause to interpret their obligations when they are no longer able to meet their obligations 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. 

Other notable boilerplate clauses

Some other important boilerplate clauses are:

• the assignment and novation clause sets out whether the obligations in the contract can be assigned or novated;
• the counterparts clause explains that parties can sign separate versions of the same document, and together they form the 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, those clauses will be removed 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 the contract can be varied. For example, the parties might agree that the contract can only be varied in writing by both parties; 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 their home 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 they are not followed, the court may not have much sympathy for the party that did not follow that clause’s procedure.  

To provide illustrations, without boilerplate clauses:

• the parties may need to spend time and money arguing over where they deal with disputes; 
• the parties may waste time working out whether the agreement also included contents of an emai; and
• a supplier might have difficulty getting out of its obligations if a natural disaster struck.

Key Takeaways

Boilerplate clauses have a purpose in a contract, and you should take care not to overlook them. These boilerplate clauses often come into effect when parties are in a dispute. Therefore, it is essential that you do not just ‘cut and paste’ them from other generic agreements. If you have any questions or need assistance drafting your agreements, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions