Introduction

In the world of contracts, there’s something almost magical about boilerplate clauses. They’re the kind of phrases and paragraphs you find time and again across a vast array of contracts. Don't let the mundane name fool you; while "boilerplate" might sound like something you'd use to patch up a steam engine, these clauses are the unsung heroes of the legal world, ensuring everything runs smoothly in the background.

Read: The top 5 contract negotiation tips for your business

The basics of boilerplate clauses

Boilerplate clauses are the standardized parts of a contract that, on the surface, might seem like canned, copy-and-paste text. However, they’re really important in protecting your rights and clarifying the terms of any agreement. These clauses are not the star of the show——but they support the entire contract by setting the rules of engagement.

Common boilerplate clauses include:

Severability or invalidity

A severability clause is like your contract’s safety feature. It ensures that if a court decides any part of the contract is illegal or can't be enforced, the rest of the contract doesn’t fall apart—it stays in effect. This helps keep the whole agreement as intact as possible. Without this clause, a single problematic section could knock down the entire contract, like a domino effect, even if every other part was perfectly okay.

Assignment

An assignment clause is all about who’s allowed to do the work. It says whether one party can pass their contract duties off to another business. This clause is crucial because it keeps control over who’s involved in the agreement. Without it, someone could hand over their responsibilities to another company without asking first. This clause makes sure the work is done by the businesses that originally shook hands on it, unless everyone involved agrees to a change.

Jurisdiction

A jurisdiction clause points out exactly where you’d need to go if you have to settle a dispute in court. For example, it might specify that any legal battles related to the contract have to be fought in the courts of California. This is super helpful for planning and strategy because it pinpoints the specific courtroom—whether it's a state, federal, or even an international court—where all the legal actions about the contract need to be taken.

Knowing this in advance adds predictability and can greatly influence how easy and cost-effective it is for everyone involved to handle disputes.

Read: The pros and cons of using standard contract templates

Governing law

A governing law clause is like picking the rulebook for your contract. It decides which state or country’s laws will be used to interpret and manage the agreement. For instance, a contract between a U.S. company and a British company might specify that California’s laws are in charge. This helps ensure that no matter where the parties are from, there’s one clear set of rules that will guide how the contract works.

Force majeure

A force majeure clause acts as your contract’s safety net. It kicks in when big, unpredictable events—like natural disasters, wars, or unexpected government actions—make it impossible for you or the other party to meet the contract’s terms. This isn't about the small hiccups; it's for serious situations no one could have predicted or controlled. This clause is there to make sure no one gets unfairly held responsible for not delivering on their promises when extraordinary circumstances throw a wrench in the works.

Entire agreement

The entire agreement clause is like saying, "This document is the whole deal." It makes clear that whatever is written in this contract is what counts, no matter what was said or agreed upon before. This clause is key because it prevents any confusion or disputes about the contract's terms by ensuring that everyone agrees this written contract is the final word, closing the door on any past conversations or informal agreements that might say otherwise.

Read: When should I hire a lawyer for my contract?

Third party rights

Third-party rights are like a guest pass to your contract party. Normally, contracts are private agreements between those who sign them, and only they can enforce or be affected by what’s agreed upon. But sometimes, you might want or need to give someone who isn't signing the contract—a third party—some benefits or rights under the agreement. A third party rights clause clearly says whether a third party—the guest—has any benefits or rights under a contract.

Variation

A variation clause is like the edit button for your contract. It sets out the rules for how you can change the agreement after it's been signed. This could be anything from adjusting delivery dates to changing payment terms. The clause makes sure that any modifications are agreed upon in a specific way, often requiring them to be in writing and signed off by all parties involved. This helps prevent misunderstandings and ensures that everyone is on board with the new terms before they take effect.

Why should you care about boilerplate clauses

Boilerplate clauses are like the plumbing in your house—you don’t think about them much until something goes wrong, and then, suddenly, they're all you can think about. They are crucial because they outline how disputes are handled, protect rights, and ensure compliance with the law. Ignoring them can lead to disputes that are much harder (and more expensive) to resolve than they need to be.

For instance, if you don’t have a solid force majeure clause and an earthquake throws off your supply chain, you might still be on the hook financially for not meeting your contract duties. Similarly, without a severability clause, discovering that just a tiny part of your contract is against the law could throw out the whole agreement. This could really stir up trouble if you’ve been doing business based on that contract for a long time.

Crafting effective boilerplate clauses

While boilerplate clauses are standard, that doesn’t mean they should be copied from one contract to another without consideration. Each contract has its own context and requirements, and what works in one situation may be inappropriate in another. Here’s how to ensure your boilerplates are doing their job effectively:

Tailor to the situation

Make sure the clauses are relevant to the deal at hand. An international contract might need more detailed jurisdiction and arbitration clauses compared to a domestic one.

Keep them up to date

Laws change, and so should your contracts. Regularly review and update your clauses to comply with new regulations and legal precedents.

Plain language

Even though these are legal provisions, keeping the language as clear and understandable as possible will help all parties know exactly what they are agreeing to.

Read: AI v manual contract review: What is right for your business?

Common pitfalls in using boilerplate clauses

One major pitfall is the “set it and forget it” mindset, where businesses insert boilerplate clauses into contracts without understanding or reviewing them. This can lead to:

Inapplicability

Using a boilerplate clause that doesn’t suit the nature of the agreement or the needs of the parties involved can create more legal issues than it solves.

Ambiguities

Vague or poorly drafted clauses can lead to differing interpretations, potentially leading to disputes and litigations.

Over-reliance

Relying solely on standard clauses without tailoring them to the specific context of the deal can leave gaps in the contract’s protections.

Conclusion

Boilerplate clauses might not get your pulse racing like the main terms of a deal might, but they are powerhouse provisions that safeguard your interests and pave the way for smooth contractual relationships. Think of them as the unsung heroes of your contracts, quietly protecting your back while you focus on the big picture. Next time you come across these clauses, make sure you don’t gloss over them—they're doing more work than you might realize.

By understanding and respecting the role of these clauses, you ensure that your contracts are not only comprehensive but also robust enough to stand up to scrutiny and unexpected challenges. So, the next time you’re drafting or reviewing a contract, give those boilerplates the attention they deserve—they might just save your bacon one day.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

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