Boilerplate clauses are useful tools for all forms of contracts. They refer to standardised clauses at the end of a contract that address general issues and the legalities within a contract, as opposed to its specific subject matter.
These sorts of clauses are usually not heavily negotiated or contested, and are often used to provide certainty on important matters or help with the interpretation of the contract. A common example of a boilerplate cause is a confidentiality clause which is included in most Australian contracts.
Although these sorts of clauses are generally standardised and placed at the end of an agreement, it is crucial to read them closely as they often contain important instructions as to how contractual obligations are to be managed and carried out.
This article will explain why it’s important not to overlook these sorts of clauses, before running through a few examples.
Why Are Boilerplate Clauses Important For Contracts?
Given the copy and paste nature of these clauses, it is perhaps tempting to give little thought to their inclusion or wording. On face value, it could seem like they relate to no substantive content contained in the contract. However, this isn’t really the best way to approach it.
Boilerplate clauses are important and shouldn’t be overlooked as they can be crucial when looking to take action under a contract or amend its terms. Further, if a dispute between parties occurs, the courts will enforce the relevant boilerplate clause, or in the alternative, use them to help interpret the contract. In this regard, dispute resolution boilerplate clauses are important.
Having such clauses is also convenient for both parties involved. The clear procedures written in the contract can help to avoid arguments over how disputes are resolved, or how a contract is meant to be managed or administered. They can help increase efficiency by stating how notice is to be given and received from the outset.
So, these sorts of clauses are important in two main ways. Firstly, they are enforced by the courts, as well as used in the interpretation of a contract. Secondly, they are useful in saving time and money for both parties by clearly setting how a contract is to be administered.
It is always a good idea to have an expert contract lawyer review your full contract, including these clauses, before any action is taken.
Types Of Boilerplate Clauses
There are too many different types of boilerplate clauses to list here. So, this article will outline a few of the major ones used in Australian contracts.
Force majeure clauses are a creation of contract law that can relieve a party from performing its contractual obligations due to an event outside the reasonable control of the parties. It is based on the common law doctrine of frustration which allows mutual discharge of the contract where performance becomes impossible.
Although the general clause will be quite broad, the ‘force majeure events’ which trigger the boilerplate clause will be specific to the sort of business you are running, as well as the circumstances it is currently in.
Clauses like this are particularly important in the current COVID-19 era, as they provide some level of protection. In the current environment, it is always worth asking for a review of such clauses to ensure that you are well covered.
An indemnity clause can specify that one party will compensate the other for losses suffered during the contract’s performance. It might also extend its coverage to things like disputes brought by a third party. However, this will be worded broadly, and will likely make one party liable for a large proportion of the risk associated with the contract.
As previously mentioned, confidentiality clauses are among the most common boilerplate clauses to be included in a contract. Put simply, they legally bind one or both parties to not reveal certain information.
In a boilerplate context, this might be broad (i.e. information shared in the business relationship), or confined to the information contained in the specific contract.
Notice clauses will serve two key functions. The first is to establish a mechanism for the giving or serving of notices. This might be something like an email or postal address.
The second is to determine when or if a notice has been delivered. For instance, this might be something like ‘by 11:59 pm AEST in 3 business days time from the sending of the initial notice’.
The notice clause should cover a certain set of situations in the business relationship. For example, it could cover the termination of your employment. However, a few complications could arise here.
In New South Wales, there are legally defined minimum periods of notice that must be given before an employee is terminated. But strictly speaking, an employer isn’t bound to give this notice. Instead of giving this legally defined minimum notice, your employer can pay you an amount equal to your wages for the period of notice you are entitled to, and ask you to leave straight away. This is known as payment in lieu of notice.
If the notice period isn’t respected, and the payment in lieu of notice is not paid, you might have a case for arguing unfair dismissal.
It is also important to note that this notice will likely cover the notice you have to give your employers before resigning. If you are in any doubt, feel free to contact our employment lawyers for assistance.
Joint And/Or Severed Liability
This clause will set out whether both parties are responsible for something or whether this responsibility falls on one party. Its consequences could be extremely significant if the relationship breaks down.
Jurisdiction And Governing Law
Although these are two separate clauses, they will most likely align. They essentially state what law will govern the contract, and in which jurisdiction potential actions will be brought. The interpretation and application of certain laws will differ from state to state. So, this clause is important if there is a potential dispute over the meaning of a specific clause.
An interpretation clause will set out the rules of construction that the parties intend to apply to the contract. This is used to provide certainty of understanding when interpreting a contract, as well as avoiding the repetition of information.
For instance, they will often include a subsection saying that ‘headings are for convenience only and do not affect the interpretation of this agreement’. As a boilerplate clause, an interpretation clause is very standardised. However, if problems arise, read it in conjunction with the main contract to make sure there are no ambiguities or inconsistencies that might negatively affect your rights under the contract.
Need Help With A Boilerplate Clause?
Though they seem simple and easily understood, every boilerplate clause has a distinct purpose in the contract. They often come into play when parties are in a dispute, and thus should not be overlooked.
Despite the name, they are also often individualised to the contract. Though the general clause might be copied and pasted, things like force majeure events or what a party must indemnify the other for are often specific to the actual contract and business relationship in question.
If you have any questions about boilerplate clauses and their application, you can reach out to us for a free, no-obligations chat at firstname.lastname@example.org or 1800 730 617.
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