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While nearly all contracts contain boilerplate clauses, you may not know what a boilerplate clause means. In essence, a boilerplate clause is a standard clause governing how the contract operates. Put another way, boilerplate clauses are distinct from commercial terms. While this may suggest that boilerplate clauses are uninteresting and unimportant, they can significantly determine the nature of the contract. This article will:
- explain what is a boilerplate clause; and
- give examples of common boilerplate clauses and their effect.
Commercial Clauses vs Boilerplate Clauses
Commercial clauses or material terms form the substance of a contract. For instance, a contract for the sale of goods will contain material terms that specify matters like:
- what goods the buyer is purchasing;
- the nature, quantity, and quality of the goods;
- the price the buyer will pay for the goods;
- how the seller will deliver the goods; and
- who bears the cost of delivery and insurance.
The substance of the commercial terms is for the parties to negotiate, often with the help of their lawyers. Lawyers for the parties tend to spend more time negotiating the substance of the material terms.
However, for the contract to have sensible legal effect, it must contain other terms that regulate the legal mechanisms within the contract. These kinds of terms are called boilerplate clauses. We will now consider the most common boilerplate clauses you will likely encounter in a commercial contract.
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What is an “Entire Agreement Clause”?
Neither party wants the contract to be unintentionally broad or restrictive. Therefore, an entire agreement clause ensures that only the substance contained in the written agreement is enforceable. This prevents one party from later alleging that the other party agreed to a verbal term not contained in the written contract.
Additionally, an entire agreement clause may restrict the causes of action available to either party for a breach of contract. For example, such a clause might state that a party can only seek relief for a breach of a term contained in the written agreement. In this sense, an entire agreement clause can minimise uncertainty and contain both parties’ liability.
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What is a Governing Law and Jurisdiction Clause?
A governing law clause specifies the body of law the court must use to interpret the contract’s terms. On the other hand, a jurisdiction clause specifies which nation’s court has the power to hear the dispute. You do not have to choose the same governing law as the jurisdiction. Though in practice, there are practical benefits in choosing complementary jurisdictions and governing laws.
In some cases, parties do not need such clauses. For instance, two parties incorporated in England and doing business only in England would rarely need a governing law and jurisdiction clause.
But if there is an international element to a contract, it is common to find governing law and jurisdiction clauses. This is because, in the event of a dispute, it is often uncertain what the appropriate body of law and jurisdiction is. Accordingly, the parties may spend considerable time and expense litigating these points well before the actual substance of the dispute can be heard.
What is a Notices Clause?
Many agreements require the parties to give notice to the other in certain circumstances. For instance, this might be for:
- serving an invoice;
- amending a term of the contract; or
- notifying the other party of a change in circumstances.
Much litigation has occurred over what constitutes giving proper notice dealing with all sorts of matters. For example, can you give notice in person or by phone? When does the party receive notice, and should it depend on the delivery method?
To avoid uncertainty and dispute, a notices clause specifies:
- what constitutes notice;
- how notices should be served and what constitutes receipt of the notice; and
- definitions for days and business hours.
What is a Force Majeure Clause?
Parties execute contracts on the basis that they can deliver on their respective obligations. But what happens if an event outside the parties’ control, like an industrial strike or war, means they can no longer fulfil their obligations?
A force majeure clause lists the events that may release the parties from their obligations. These commonly include:
- adverse weather like floods and hurricanes;
- labour disputes, strikes, and industrial action;
- war and armed conflict;
- terrorism; and
- government actions.
Likewise, a force majeure clause may specify:
- to what extent it releases the parties from their obligations; and
- what each party should do to mitigate the effect of the force majeure event.
Key Takeaways
There are many kinds of boilerplate clauses, including:
- entire agreement clauses;
- governing law and jurisdiction clauses;
- notices clauses; and
- force majeure clauses.
In some cases, the effect of these clauses might be minimal. In other cases, the wording of a given boilerplate clause can be significant.
If you need help understanding the effects of boilerplate clauses in your commercial contracts, our experienced commercial contract lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A governing law clause specifies the body of law the court must use to interpret the contract’s terms.
A jurisdiction clause specifies which nation’s court has the power to hear the dispute. While you do not have to choose the same governing law as the jurisdiction, there are practical benefits in choosing complementary jurisdictions and governing laws.
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