Every day people and businesses enter into contracts for one reason or another. If you are running a businesses you likely have contracts that you have your customers/clients sign which outline the obligations of each party. Most people only really consider the “meat” of the contract…you know, the who, what, where and when; but what about all of that “lawyery stuff” at the end? Many people will put boilerplate language into their agreements without knowing what implications those clauses will have on them if either party fails to live up to the terms of the agreement. Similarly, people will sign a contract without paying attention to all that “lawyery stuff” at the end because…well, it’s boring and can be hard to understand. Does all that boilerplate language really mean anything? Yes! Especially if the person drafting the contract may have just cut and paste clauses off of something they found on the internet without really understanding how those things would be applied when things fall apart.
Sure, it seems easy to just cut and paste and/or use prior agreements and roll them over into a new situation…but it may cost you more in the long run if and when something goes wrong.
The boilerplate language at the end of your contract are important for a few reasons:
- They are real contractual terms that have to be understood
- They impact your legal rights as to the agreement
- They can actually control or limit the enforcement of your contractual rights
- They can, perhaps unintentionally, void portions of your contract that you might have already negotiated in your contract
What are some of the “boilerplate clauses” that are typically at issue in a contract? The following are a few clauses that are important to review:
- Choice of Law and/or Choice of Forum Clauses
- These can define the law that will govern the contract which can get sticky if your contract is contrary to this clause.
- These can define the place that the contract can be enforced which may or may not be favorable to you.
- These may limit your rights to sue in certain kinds of courts.
- These may subject you to a certain jurisdiction regardless of whether or not you happen to live or have minimum contacts with that particular jurisdiction.
- Arbitration Clause
- This is primarily used to discourage litigation by limiting the right to a trial through a traditional court system.
- This can be more cost effective way to resolve disputes than going through a full blown litigation. This is not always the case.
- These can describe the specific process for proceeding through to arbitration which can be very different that a traditional court proceeding.
- Jury Trial Waivers
- A person needs to understand what exactly is being waived in by the clause.
- A person needs to understand whether or not the clause will be enforceable in the state that the agreement is to be determined under. Not all states would enforce this kind of a clause.
- Severability Clauses
- These usually say, generally, that if one clause or portion of an agreement isn’t enforceable then it is eliminated and all the rest of the contract is still in tact but some states won’t enforce it and therefore the entire clause could be void.
- Sometimes these issues can be carved out specifically to protect the rest of the agreement.
- Cooperation Clauses
- These usually state that the parties are suppose to cooperate, etc. and it seems like it could be a good idea, however, one person’s cooperation might be another person’s demand for additional terms that aren’t in the agreement in the first place.
- Sometimes these issues can be spelled out so that there isn’t unintentional consequences in the future.
- Integration/Merger Clauses
- Think about all of the prior communications and documents that are related to the agreement…is everything necessary and material in the actual agreement?
- Have all representations that have been made the parties, agents of the parties, etc., all been incorporated?
- Is everything listed in the clause true?
- Are you sure what the implied and express warranties are?
- Do you need to limit any certain warranties?
- How does the governing law handle warranties?
- Damages Clause
- Do you have a situation where you want to limit the damages?
- Does the state law governing the agreement refuse to enforce the kind of limit you are trying to provide for in the contract?
- Estimated damages or liquidation clauses need to be supported.
- Penalty clauses that appear to be purely punitive (as punishment) are not likely to be enforced.
- Indemnification Clauses
- These are good for situations where some third-party might sue one of the parties of the agreement and the other party doesn’t want liability.
- These are good to have so long as they are tailored to fit the governing law of the contract; are tailored to spell out who is indemnifying who for what; and outlines the process for getting notice of the indemnification, etc.
- Certain claims cannot be covered by an indemnification clause.
If you are unclear as to whether or not the boilerplate language is appropriate for your situation, and you want to work through the issues, you are encouraged to speak with a Contract Attorney in your area who can assist you. Beebe Law, PLLC is an Arizona based law firm representing clients in the state of Arizona.