Earlier this year, I posted a blog about contract boilerplate. In that post, I explained
- what boilerplate is
- how specific key boilerplate provisions work
- and why they’re so important.
Since then, I’ve had several clients ask detailed questions about the boilerplate provisions in their contracts. Some of them keyed in on contract provisions that I didn’t mention in my earlier post – provisions like the integration clause, the language governing contract amendment, and the execution section.
In this post, I’ll explain how these additional boilerplate provisions work and why you need them in your contracts.
Entire Agreement
Sometimes, contracts are formed more or less instantly – you fill out and sign an order form, the vendor countersigns, and you have a contract. But most contracts require a period of negotiations, offers, and counteroffers before they’re finalized and signed. Have you ever wondered what “happens” to your previous oral or written proposals, offers, and agreements once you sign the final contract? Do they vanish in a puff of smoke, or are they somehow integrated or incorporated into the final contract?
The integration clause, sometimes called the merger clause, is intended to address this very issue. Typically, parties prefer that the contract be “fully integrated”; that is, the contract is understood to represent the complete and final form of the agreement, supersede all their previous discussions and agreements, and establish the terms of their relationship going forward. But sometimes, parties want to incorporate specific portions of their prior discussions into the contract. In both situations, a carefully drafted integration clause can help parties make clear what counts as part of the contract and what doesn’t. Moreover, doing this upfront, in the contract’s integration clause, can spare contract parties the time and expense of litigating the issue later once a dispute or disagreement arises as to the contents of the contract.
Execution
Once you negotiate a contract and finalize the language, you need to sign the contract. If you and your counterparty are going to meet and sign the same sheet of paper, then contract execution is simple. These days, fewer and fewer contracts are signed that way. Contract parties don’t always meet in the same place to sign the contract and often don’t “sign” at all. The execution provision, which is sometimes included in the “counterparts” section, should address proper execution methods in detail, along with the consequences of those execution methods.
The execution provision should address what methods are effective for execution and, if applicable, which aren’t. For example, is a contract that’s printed, signed, and scanned or faxed to the counterparty properly executed? What about a contract executed by DocuSign or similar e-signature software? You’ll want to tailor your execution provision to the facts of your situation or the standard practices in your line of business. You should also consider what happens when there are two partially executed copies of the agreement – typically, these are called “counterparts,” and they can exist in situations when both sides sign the agreement in separate locations and send copies or images of the partially executed agreement to each other. The most common way of handling counterparts is to agree that the two (or more) counterparts form a single agreement. An experienced attorney can advise you if that’s right for you and your particular agreement.
Amendment of Agreement
At this point in the process, you’ve agreed on the contract language, including the integration clause, decided what constitutes “execution” of the contract, and actually signed the agreement. That’s great! But what happens when circumstances change or unexpected events occur, and you need to change the terms of the deal? What differentiates an effective amendment of the contract from mere discussions or proposals?
As always, you’ll want to consider your particular situation in drafting an amendment provision for your contract. In some cases, allowing oral amendments is acceptable. In other instances, amendments need to be written but might not necessarily be “formal” amendments – email or other written communications might suffice. In other cases, using specific forms, like change orders, can be a desirable way to agree upon and put certain, limited types of the amendment into effect. For example, you might want to specify that certain types of amendments can only be signed by certain officers – under many construction contracts, only a project manager can sign a change order. Or you might agree ahead of time to amend the agreement in certain situations. In most cases, it’s most prudent to require a formal amendment that
(1) is in writing,
(2) specifically identifies the contract and states that it is an amendment, and
(3) is signed by all parties to the contract.
A note of caution is required here – limitations on the parties’ rights to amend the contract orally or with a less formal written agreement are not always enforceable in court. They should, nevertheless, be included in the contract. Even if they’re not enforceable, provisions limiting or explaining how to amend the contract can inform the parties’ expectations and establish a standard of conduct in contract performance.
What Should You Do?
Like my first blog on boilerplate, this post should demonstrate the importance of the fine print in your contracts. Having the wrong boilerplate can lead to confusion over whether a contract exists or what the contract says, and you shouldn’t trust any old form contract to have it right. If you need help reviewing and revising the boilerplate provisions of your contracts, you can learn more about Venn Law Group’s corporate practice group at this link or contact us here.
Edward B. Woodall is an attorney at Venn Law Group who works in corporate law and commercial real estate, including leasing, financing, taxation, business structures, and dispute resolution. He is passionate about helping business owners solve a variety of complex legal problems and has performed more than 100 hours of pro bono work. In addition to his law degree, he also has a background in history and Spanish.
Edward B. Woodall is an attorney at Venn Law Group who works in corporate law and commercial real estate, including leasing, financing, taxation, business structures, and dispute resolution. He is passionate about helping business owners solve a variety of complex legal problems and has performed more than 100 hours of pro bono work. In addition to his law degree, he also has a background in history and Spanish.