Boilerplate clauses are standard sections found in many contracts that address common legal issues and formalities and are generally found at the beginning and end of a contract. Whilst these clauses can appear routine and generic, this is a dangerous position to adopt as in reality they fulfill an important role of clarifying the rights and obligations of the parties to a contract and assist in managing potential risks and disputes. In this edition of Exploring a Contract we will take you though some of the common boilerplate clauses found in business-to-business contracts.
Governing Law
A governing law clause, sometimes also known as an applicable law clause, proper law clause or choice of law clause, specifies the system of law that will apply to the interpretation of a contract and its effect if a dispute arises but it does not indicate how disputes are to be resolved, for example through the courts or through arbitration. This clause is important because laws can vary significantly between jurisdictions, so parties often choose a governing law that is familiar to them or best suits the nature of the agreement.
Jurisdiction
The jurisdiction clause is a dispute resolution clause which identifies the location of the court system where any legal disputes arising from the contract will be resolved and whether such court will have exclusive or non-exclusive jurisdiction. Although similar and often combined with a governing law clause, it is important to remember that the two principles are different and should not be confused as being the same. Inclusion of a jurisdiction clause can, among other things, save considerable time and cost of a dispute over which courts have jurisdiction and increase the likelihood of enforcement of the court's judgment if the parties choose a respected jurisdiction.
Entire Agreement
The purpose of an entire agreement clause is to give the parties certainty that written contract represents the entirety of the agreement between them and to ensure that it supersedes any prior agreements, understanding, or negotiations, whether oral or written. It is crucial to give proper consideration to the drafting of an entire agreement clause, as it is one of the most heavily disputed clauses among the boilerplate clauses.
Notices
A notices clause ensures that both parties have certainty and clarity in relation to the giving of notice to, and receipt of notices from, the other parties to the contract and can include specifics as to:
- the format the notice should take;
- the methods that can be used to deliver;
- when a notice is deemed to be received;
- the contact details of the parties; and
- how a party may change its contact details.
Requirements within a notice clause are important to be aware of because of the potential consequence of failing to comply, for example, where a contract specifies a deadline for a notice to be served and a party wishes to serve notice to terminate, it is pivotal that the deadline and any other notice conditions are met to ensure the notice to terminate is validly served to avoid unwanted renewal or continuation of a contract. In the absence of a contractual notices clause within an agreement, the default statutory provision may apply such as provisions given under the Companies Act 2006, the Law of Property Act 1925 and/or the Landlord and Tenant Act 1927.
Severance
The purpose of a severance clause is to ensure that, if any of the provisions of a contract are found to be illegal, invalid or unenforceable, the rest of the contract survives and continues to be valid by providing that, in those circumstances, the problematic wording is deleted and the remaining provisions of the contract continue unaffected. Essentially, the wording rendering a provision, or part of a provision, illegal, invalid or unenforceable, will be severed from the rest of the contract. Although the doctrine of severance can still be applied a court in the absence of an express severance clause, in practice, it is still useful to include an express clause as the courts may apply the law differently to the parties' intentions.
Counterparts
It can sometimes be difficult to get all parties to a contract to sign the same physical copy of a contract where there are a large number of parties or where the parties are located in different places. A counterparts clause can be useful in this case as it provides that the parties to a contract may execute separate copies of it, rather than all parties having to sign the same copy. Inclusion of an express counterparts clause (and if applicable, express provision for electronic signature) is advisable for certainty and to prevent any argument that the agreement is not binding because it has not been properly executed, although the parties will not be prevented from executing a document in counterpart where an express clause is not included.
These are just some of the boilerplate clauses that can be found in commercial contracts. It is important that parties review these and other boilerplate clauses carefully and consider their implications when negotiating contracts as disputes are often governed and decided by them. Whilst boilerplate clauses are often viewed as standard and miscellaneous, they play a critical role in clarifying the legal framework of a contract and ensuring that the parties' intentions are accurately reflected.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.