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Breaking down boilerplate clauses and why they’re important

Written by Kate Legg on Thursday, 18 January 2018. Posted in Legal

While boilerplate clauses are used in a majority of contracts, they aren’t always easy to understand. Fortunately, Kate Legg is here to deconstruct the jargon

Breaking down boilerplate clauses and why they’re important

You may not have heard much about boilerplate clauses but I guarantee pretty much any contract you ever sign will contain them. Boilerplate clauses are the short clauses that usually appear at the end of the document. They are often overlooked – partly because they’re fairly standard and non-controversial and partly because most people stop reading before they get that far. Nonetheless, they are important and so I’m shining a light on this otherwise overlooked and undervalued part of contracts.

Boilerplate clauses take their name from the rolled steel “boilerplate” that wraps around boiler frames and holds everything in. In many senses, that’s exactly what boilerplate clauses do – they wrap around the contract and help to keep everything together by making sure it works the way that was intended.

Here are a few of the common clauses:

Entire agreement

This clause denotes that the contract represents the entire agreement between the parties, the idea being that the parties can’t rely on promises and arrangements made outside the contract. For example, the clause tries to exclude promises and assurances that may have been made by email or during the initial negotiations when sales staff may have been tempted to make exaggerated claims to win the deal. If any special arrangements have been agreed, or if the parties are relying on any promises or assurances, they should all be set out in one place – the contract – to avoid arguments in the future as to what the agreement actually was.

Variation

These clauses will say that any variations or amendments to the agreement are only effective if made in writing and signed by both parties. As with the entire agreement clause, the idea here is to avoid confusion about what has been agreed if for example, one party requests a change to the contract and it is not clear whether the other has accepted the change. With this clause, the default position is that there are no changes unless and until the change is agreed in writing and signed by both sides.

No waiver

There is a general legal principle that if you have a claim against someone, you ought to act swiftly and bring the claim relatively quickly after you become aware of it. This is to prevent someone carrying on as normal and then trying to bring a claim years later.  However, often, the party not in default will want to be nice and give the other side a bit more time to sort themselves out and hopefully remedy the situation without resorting to litigation. The purpose of a no waiver clause is to allow the injured party to be nice without prejudicing their overall position. For example, it would allow someone who is owed money to let the debtor have a bit more time to pay without losing the right to bring a claim if the debt is not ultimately repaid. This type of clause will say that a delay by a party exercising their rights will not amount to a waiver of those rights.

Joint and several liability

Sometimes one party will include more than one person to. For example, a franchisee could be a partnership of two people or a guarantor under a franchise agreement may be comprised of two or more key individuals. This clause makes each person individually liable but also makes them liable for the acts of each other. If any one of them is in breach, then the party not in default can choose whether to sue some or all of them. This may be helpful if it’s easier or more convenient to sue one individual over the others. For instance, the injured person may not be sure who holds assets and is worth suing or it could be that one person is outside the UK jurisdiction and so would be more difficult to sue – or it may just be that the injured party doesn’t know specifically which of the individuals is in breach and so reserves the right to sue everyone.

Severance

Contract draftsmen always strive to get things right but sometimes a clause that is included in a contract may subsequently be held illegal or invalid by a court. This could be because the law changed after the contract was written or because the clause involved a judgement call by the parties and the court disagrees with their decision. A severance clause allows the court to cross out any bits of the contract that are invalid and unenforceable without affecting the validity of the remainder of the agreement.

Law and jurisdiction

For the most part, the parties to a contract are free to choose the law and jurisdiction that they wish to apply. However, if an express choice is not made, then there are complicated rules to work out which laws will apply. Generally, it is much easier and more desirable to make an active choice rather than relying on the default rules. The law and jurisdiction clause will state which law is to be applied to the contract and who has jurisdiction. For most domestic contracts, this will be English law and the English courts will have jurisdiction to settle any disputes arising out of it.

These are just a brief selection of a few common boilerplate clauses. There are many more and, depending on the nature and complexity of the agreement, boilerplate clauses could run to several pages. The important point is to be aware when boilerplate is being used and to ensure it is appropriate to your specific agreement.

About the Author

Kate Legg

Kate Legg

After more than a decade advising other business owners, Legg has recently fulfilled a long held ambition and become one herself. Now the founder, director and CEO of Komerse, a legal practice specialising in commercial law and franchising, Legg is clearly practising what she preaches.

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