Boilerplate clauses are typical clauses that are contained in the latter part of a contractual agreement. Not all boilerplate clauses are appropriate for all types of agreements and it is important that the person who drafts the contract has a good understanding of the clause’s usage. The most commonly used boilerplate clauses are discussed below, along with an explanation of their purpose.
An amendment clause provides the means by which the parties are entitled to make changes to the contract.
This is a term used to refer to the rights and obligations of a party to a contract and the ability or not of that party to pass on those rights and obligations to a 3rd party. Often contracts have a ‘no-assignment’ clause, which prevents either party ‘sub-contracting’ their duties under the contract.
The purpose of arbitration is to provide an alternative to litigation. It is generally quicker, cheaper and is less formal than going to court. Arbitration can be particularly useful in resolving disputes that are of a highly sensitive or confidential nature. Often a contract will have an arbitration clause so that a dispute will be resolved by an impartial tribunal without either party having to resort to costly and lengthy litigation.
Contracts (Rights of Third Parties) Act 1999
This statute allows a third party (i.e. a person who is not a party to the contract) to enforce a term of the contract in two situations: firstly if the contract expresses this ability, or secondly if it is apparent that the contract gives him some kind of benefit. In practice, many contracts seek to exclude third parties from claiming that they have rights under the contract or in the alternative, list the parties who do have recognised rights under the contract.
This is a very useful clause that has the effect of limiting all the parties’ rights and obligations to only the provisions contained within the contract and any attached schedules. This means that neither party can claim to have acted based on any statement, discussion or document not expressly contained within the contract.
Force Majeure is a clause which prevents the parties to a contract from being liable in the event that circumstances outside their control stop them from being able to undertake their obligations under the contract. The theory behind this lies in the legal doctrine of ‘frustration’ – that parties should not be penalised for the actions or fault of another and which they could not reasonably have foreseen.
This clause provides certain meanings for elements of the contract, e.g. if a statute is referred to in the contract and it is later amended the contract shall be deemed to be referring to the amended legislation. In addition, he, she or they can be agreed to be ‘they’ to avoid repetition and the untidiness of ‘he and/or she and/or they’.
Law And Jurisdiction
This determines the law of the country (or state) that governs the contract. In the event of litigation the jurisdiction is the country that will hear any legal dispute.
This provides the parties to a contract with an agreed method of communication upon the occurrence of specific events. It is a very important provision as it sets out the way in which parties should communicate, and the timescales, thereby avoiding dispute later on. If parties are in different countries, this is likely to be by electronic means.
This is generally a clause that prevents one party from deducting money owed from money payable to the other party, in other words giving themselves a ‘self-awarded discount’. This means that if a seller owes a purchaser money, for whatever reason, the purchaser cannot deduct this from money that is used to pay the seller the purchase price under the contract.
Severance And Invalidity
If a clause to a contract is found to be invalid, illegal or otherwise unenforceable, this clause allows the parties to remove the clause/words and continue performing under the contract. However there are limits–if removal of the illegal or invalid clause makes the contract unworkable, the contract will be void.
This sets out the ways in which the contractual relationship can come to an end. This may be at the end of a fixed term, if the contract is breached by either party, by granting the other party notice of termination (e.g. 30 days notice and in writing) if one party becomes insolvent, bankrupt or is liquidated, or a dispute arises between them that stops them from being able to continue with the contract. There will often be a further section in this clause which explains what happens when the contract is terminated.