6 Known Boilerplate Clauses and Why They Matter
Boilerplate clause are often the most overlooked and neglected clauses on a legal document. However, these clauses are by no means irrelevant and equally as important as the legal document’s essential parts. In fact, your next dispute might turn on these very clauses.
Depending on which side of the contract you are on and the wording of the clause, you may get hard done if you ignore the boilerplate clause. Here are six known boilerplate clauses that you should be aware of and why they are important.
- Indemnification Clause: Indemnity clauses serve to manage the risks associated with a contract. They define the context of legal action against the indemnified party. This clause also covers lawsuits, actions, damages, demands, liabilities, losses, damages, and claims associated with a contract. In addition, it also covers legal action on extreme cases like injury and/or accidental death in the contract.
- The most important thing here, is who is the one with the most exposure. Mutual indemnification clauses don’t always make sense.
- Jurisdiction Clause: This clause defines the most appropriate form of dispute resolution. For instance, a lawsuit must be filed or the substantive laws to be invoked in the case of a contract breach. Generally, the one presenting the contract will choose their location for the jurisdiction. You CAN negotiate. How about first to file chooses jurisdiction or maybe neutral ground or even just arbitration.
- Arbitration Clause: Arbitration clause provides the framework for resolving legal disputes and offers an alternative to taking issues court in the event of legal disputes. Arbitration clauses are of great significance because they make the arbitration of legal matters easier when properly drafted. What you need to look out for, is it mandatory? Who pays for the arbitrator, how many arbitrators and WHO picks them? Most arbitration institutions will have their own enforceable language, otherwise that arbitration clause you have in your contract might be UNENFORCEABLE.
- Force Majeure Clause: The French words” force majeure” roughly translates to “superior force.” It is a type of boilerplate clause that defines what happens when a “force majeure” event like natural disasters, for instance, occurs. Force majeure clauses are important because they define instances when parties can be relieved of their responsibilities, obligations, and liabilities if the incidents covered by a force majeure clause occur. This is the clause companies turned to when the pandemic began, and to some surprise, maybe the pandemic did NOT excuse performance because it wasn’t included. Isn’t it time to update your contracts?
- Confidentiality Clause: Also known as non-disclosure agreements (NDAs), this clause states that certain information shared under the contract are not discussed with parties outside the contract. Breaching this clause (consciously or not) comes with consequences that are often financial as well as equitable. These can carry very heavy consequences, and in some instances should!
- Choice Of Law Clause: Also known as the Governing Law clause, this boilerplate clause defines the substantive laws that apply in the case of a contract breach. It is particularly important because the breach might occur in different geographic locations. A choice of law clause defines the laws to be used in such disputes to avoid uncertainty and possible delay in getting justice. You can find instances where the Venue and Choice of Law are different. While, in theory, this can work, once you get into a Court, the judge has some discretion.
While the meat of the contract is important, often I see disputes turn on the boilerplate clauses since they are often skimmed and glazed over. Lawyers will read contracts like you read a book, tying pieces and plots together to form the whole picture. Let us lay the foundations for you.