Boilerplate clauses are, by definition, routine provisions that appear in nearly all business contracts and are often overlooked. This does not mean they lack significant weight or have any impact on your business agreement.
The purpose of boilerplate clauses is to protect the interests of all parties that sign the contract. In practice, some may favor one party over the other. That is why you need to discern them, or have a lawyer review all of the paperwork.
Standard Clauses Within Written Agreements
Although boilerplate provisions vary from contract to contract (another reason to pay attention to them), there are a handful of common ones.
Sometimes referred to as a “hold harmless” clause, this clause aims to specify which party is responsible for litigation brought by a third party. This is often meant as insurance for parties that hire contractors or other parties they might regularly do business with.
Occasionally, compensation for a specific job is best held in a special account while the work is being completed. The escrow clause may also specify in which circumstances the escrow account may be touched, and by whom.
Choice Of Law Clause
In the case of a contract breach, the parties need to decide which state’s legal rules apply. This is especially important if each party is located in a different state. Because laws vary depending on the region, a party may want to choose a relevant clause that benefits them. With that said, the states in question need to have a connection to the parties or their business. There must be common sense and relevance.
Along with the choice of law, this clause defines in which state a suit must be filed in the case of a contract breach. If choosing a region where neither party operates, then there needs to be a relevant connection and reason. If both parties are in the state of Florida and selling oranges, their contract must still define if the case falls under Florida jurisdiction. Nevertheless, a court is likely to be unamused if one party wants to abide by, for instance, Alaska legal laws, since Alaska has no connection to Florida oranges.
The notice clause specifies the manner in which notices are disseminated and delivered to the two parties. The notice clause touches on many other clauses because to amend the contract, for example, you must properly notify the other party.
This particular provision states that certain business operations performed under the contract are not to be discussed with outside parties. A common name for this is a non-disclosure agreement or NDA, which is common in other types of contracts besides business.
As arbitration is the most commonly used alternative dispute resolution, there is a good chance your business contract will address this possibility. Arbitration refers to settling a legal matter outside of court with a third party — the arbitrator — and letting them determine a resolution. The provision could state that any dispute will be settled by arbitration, for example, or it could determine whether or not the decision or an outside arbitrator would be binding.
Force Majeure Clause
Translating into “superior force” from French, this exempts parties from adhering to the contract when an unforeseen event radically changes things. Such an event is sometimes referred to as an “Act of God” and includes many types of natural disasters.
This lays out the process and requirements for a valid alteration of the original agreement. The clause defines the conditions for changing the contract or certain details. Both parties need to provide proof in writing that they agree in a standard amendment agreement.
This clause simply affirms that all (or specified) terms apply only to the two parties that signed the contract. This is to affirm, among other things, that neither party contracts or subcontracts out any part of the operation.
Examples Of Boilerplate Clauses
Confidentiality clauses and NDAs are common for independent contractors that work with established Intellectual Properties, or IPs. For example, a writer working on an official Spider-Man or Star Wars novel is contractually obligated to not promote or discuss it until the work is published, with a time period set usually.
Breaching a clause usually has monetary consequences. The damaged party may ask to receive a settlement, and the court will award a certain amount. It can also damage your reputation regarding how you honor legal documents.
Consider what happens when confidentiality is violated. Sometimes a breach may include talking about a case on social media, or in other forms of written record. In that case the judges may dismiss the case. Other times, a party may publish information that was considered confidential, and be sued for potential damages.
Implement Legal Advice From Trembly Law
The Trembly Law Firm will help you avoid the typical pitfalls of boilerplate contracts. Whether you are the contracting party or the one signing the papers, we will translate the terms for your benefit.
Reach out to us today to refine your legal advice. When disputes arise, you want a good legal team on your side. Trembly Law will help you define law and jurisdiction, with relevance and meaning.