If you’re like most business professionals, you see a lot of contracts. Order forms, service agreements, and employment contracts float into your inbox and across your desk every week. You’re probably good at identifying the key terms of the contract – price, quantity, delivery date, etc. However, when it comes to reading the fine print, your eyes glaze over. There’s a reason they’re called “standard terms and conditions,” you think. But these terms and conditions (often called “boilerplate”) can be anything but standard. Contract boilerplate can have a crucial impact on contract parties’ duties to each other and how a contract dispute is resolved.
In this blog post, I’ll explain why boilerplate matters and then walk you through some of the most common boilerplate provisions and why you need to have an attorney review them with you.
What is Boilerplate and What Does It Do?
As I said above, boilerplate is the commonly used term for the standard contract language that is tacked on to the end of most contracts. It’s the standard terms and conditions, and will usually be hidden under headings like “General,” “Miscellaneous,” or “Additional Terms.” The boilerplate can control matters such as:
- Where disputes are resolved, and what law will apply to the contract;
- How the parties can send formal communications to each other;
- What happens to the parties if a natural disaster delays performance of their obligations;
- Whether a party can assign its rights and duties under the contract;
- How the contract can be amended;
- What happens if a court decides part of the contract is unenforceable; and
- Whether or not previous discussions and proposals are part of the contract or not.
With all these issues, the law will provide answers if your contract does not. But these answers will vary from case to case and contract to contract, and may not satisfy either party. That’s why it’s important to work with a knowledgeable attorney to draft boilerplate that fits your situation. That’s also why it’s important not to copy and paste boilerplate from a generic agreement – the answers provided to the issues above might work for one company and not another, or might be good in one type of contract but harmful in other settings.
Common Boilerplate Provisions
Choice of Law and Choice of Forum
Most professionals don’t think about “choice of law” and “choice of forum.” Most attorneys probably don’t think much about them either. But these boilerplate provisions can make a big difference in the event of a contract dispute. Choice of law clauses establish which state’s law applies to contract interpretation and dispute resolution. Choice of forum clauses (sometimes called forum selection clauses) predetermine the forum (i.e., the court and the location) for any dispute involving the contract. Usually, the parties will try to select a legal regime and a forum that are convenient for one or both of the parties.
Choice of law and choice of forum questions are implicated whenever contract parties live, work, or perform their contractual obligations in multiple states. For example, suppose your business is in North Carolina, and you provide services to a South Carolina company – which state’s law will control the interpretation of contract terms? Or imagine you own a South Carolina business, and you have a dispute with a supplier from Pennsylvania over the quality of goods delivered to a branch office in Virginia – if you have to sue them, where do you have to go to do so? While the law will provide default answers to these questions, the answers are usually very fact-specific, and sometimes they can surprise both parties. Having the right choice of law and choice of forum terms in a contract can give both parties confidence in knowing where and under what law contract disputes are to be decided. These provisions can also bring substantial benefits to the drafting party by requiring that the contract be interpreted according to their home state’s laws or requiring the parties to litigate close to home.
Notice
Contract parties are often in close contact with each other by email, telephone, or in person. Usually, an informal conversation is all the parties need. But sometimes, a contract requires one party to give “formal” notice to another party. Formal notice is usually required for significant contract events or changes, such as contract termination, delivery of goods, or change orders. The notice provision of most contracts is generally buried deep in the terms and conditions, but it shouldn’t be overlooked. Think hard about what methods of communication will constitute “formal” notice and which will not. Of course, you want a certain degree of formality to avoid unintentionally communicating an important notice, such as by saying something on the phone or sending a text message. But you don’t want giving notices to be too demanding, or you might be unable to deliver them in a timely manner. Talking with an attorney about your concerns and the practices in your particular line of business can be helpful when drafting a notice provision that works well for you and your business.
Force Majeure
While you might have never heard the phrase “force majeure,” you’re likely familiar with the concept.
For example, what happens if you have a contract deadline and are prevented from meeting it due to a hurricane, a fire, a plague, or other so-called “act of God”? Unfortunately, almost everyone has experienced unforeseen delays in the past few years as COVID-19 lockdowns, quarantines, and supply chain issues have caused unprecedented delays in contract performance. Without a force majeure provision, a party that doesn’t meet its deadlines has usually breached the contract. But a force majeure provision can allow a party to delay the performance of certain obligations if the delay is caused by an act of God, an unforeseeable event, or certain other occurrences. Therefore, a force majeure provision can help define:
- Which events create a permissible delay and which don’t;
- Which contractual obligations can be delayed and which can’t;
- How long such a delay can last before a party is in default; and
- What, if any, procedural hoops a party has to jump through to avail itself of the benefits of the force majeure provision.
Assignment
When you sign a contract with someone to provide a service or deliver goods, you expect them to handle the performance or delivery themselves. But without a proper assignment provision in your contract, your counterparty can assign the contract to anyone of their choosing – and so can you. Parties to contracts should review the assignment provision carefully and tailor the specifics to the situation. Sometimes, it doesn’t matter if one or both parties assign the contract. Other times, assignment is an expected part of the contract – as is often the case in real estate deals, a parent entity will sign a contract and then assign it to a subsidiary or special purpose entity. And in some cases, assignments can defeat the purpose of the contract entirely – if you hire a particular artist to paint a mural on the side of your building and they assign the contract to a different artist, you won’t get the mural you paid for. You and your attorney need to have a firm understanding of your line of business and the particular circumstances of each contract so that the assignment provision can be drafted appropriately.
Understanding Boilerplate
As you can see, the fine print in a contract can significantly impact contract interpretation and performance. With the wrong boilerplate, you can find yourself litigating disputes in far away states under unfamiliar law, in default after a natural disaster delays contract performance, or dealing with a complete stranger after your counterparty assigns the contract. Lack of boilerplate, or having incorrect or inapplicable boilerplate, can also make litigation much more expensive and time-consuming, since the parties then have to spend time and money arguing over issues such as where to resolve disputes, what happens to the rest of the contract after part of it is ruled unenforceable, and whether pre-contract communications can be used to interpret the contract or not.
At Venn Law Group, we have experienced contract attorneys who can help you understand and negotiate contracts before you sign them. We can also prepare contract forms for your business so that the boilerplate in your contracts works for you.
Edward B. Woodall is an attorney at Venn Law Group who works incorporate 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.
