Boilerplate clauses are standard clauses, phrases and concepts
that appear in commercial agreements. These clauses are necessary
components of a contract. Each clause carries a very specific
meaning and serves a particular purpose which has an effect on the
rights and obligations of the contracting parties.
Contracting parties beware - many of these "standard"
provisions may conceal significant legal and business implications
that, if not tailored to the specific circumstances of a
transaction, may potentially produce unwanted results. If each
provision in a contract is not fully understood by the parties
involved, using them in an agreement can unintentionally defeat the
contractual intent of the parties. It is important to review each
contract provision carefully to consider whether or not the
provision is beneficial to include.
Outlined below are several examples of "standard"
provisions which are commonly found in commercial
agreements. Please note the list of provisions discussed in
this article is by no means exhaustive. There are many other
provisions that are used in various contracts.
The purpose of this clause is to achieve certainty by defining
what is and is not part of the agreement. The advantage of using
this clause is to ensure that the parties get what they bargained
for, as it is contained in the text of the agreement. This clause
will likely indicate that the terms of the agreement will be
interpreted without reference to extraneous agreements or
documents. It also serves to rule out reliance on
representations regarding any statements that may have been made
during negotiations. The danger here is that, if a key term of the
agreement to a party has been omitted for whatever reason, the
party will not be able to rely on it.
The waiver clause aims to avoid findings that a party waived
their right to enforce provisions of an agreement by prior silence,
inaction or conduct, and may also indicate conduct that shall be
considered a waiver of rights under the agreement.
The purpose of this clause is to place a restriction on a
party's right to assign or transfer his or her rights and
obligations under the agreement to a third party. If an
agreement is non-assignable, this clause may also indicate the
consequences of an attempted assignment. There may be
situations where one party does not want the other party to have a
right to assign their interest in an agreement. The agreement
needs to expressly provide for this.
This clause is intended to preserve the heart of the agreement
even if certain provisions fail. A severability clause indicates
that generally, if a part of the agreement is found to be invalid
or unenforceable, and if it is not vital to the agreement, that
part may be severed and the remainder of the agreement will operate
as if it were the entire agreement. The failure to include
such a clause leaves open an argument that because certain key
terms of an agreement are unenforceable, the entire agreement is
Dispute Resolution Procedures
This type of clause is intended to facilitate the resolution of
any disputes arising from or related to the contractual
relationship between the parties to an agreement. Shareholders
may specify the type of mechanism they wish to use to resolve a
dispute, disagreement, deadlock, or other controversial matters
requiring resolution. The type of dispute resolution mechanism is
important because, for example, a party's right to litigate a
dispute may be precluded if the agreement provides disputes will be
settled by binding arbitration.
This clause allows the parties to choose the law that will apply
to resolve disputes arising from the agreement or the relationship
between the parties. It is advisable to set out the governing law
and suitable venue, and is especially necessary when shareholders
are spread across multiple jurisdictions. If the parties are
located in the same jurisdiction, the choice of a governing law
should be uncontroversial. If a governing law clause is not
included, and if parties from multiple jurisdictions are involved
in the agreement, litigation surrounding the issue of which
jurisdiction's law should apply can be quite costly, involved
Since boilerplate provisions tend to be more general in nature
than other clauses in an agreement, there is a tendency only to
give a quick glance at these provisions before signing on the
dotted line. However, it is important to ensure that the meaning
and purpose of each provision is fully understood in order to
verify that the rights of the contracting parties are in fact
protected and to avoid the possibility of unexpected, unwanted
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