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What is a Boilerplate clause?

They’re types or classes of clauses which are commonly found in business to business contracts. 

They may look the same if you are unfamiliar with them. Slight differences in wording can make all the difference in to their legal effect.

They’re usually inserted at the end of a commercial contract.

They establish  legal relationships in contracts with more certainty, whether for or against you.

They change the way the general law would apply to the contract.

Heads of Terms, Letters of Intent: they refer to the same thing.

They can abbreviated to “HOTs” and “LOIs”.

In business, they also go by the names of “term sheets”, “memorandum of understanding”, “letters of understanding”, “heads of agreement”, “letters of interest” and “term sheets”. In the construction industry, heads of terms are often wrapped up and packaged as letters of intent or “LOIs” for short.

They’re usually exchanged by the 2 businesses in draft form before they’re finalised – to reach what businesses call “commercial agreement” – to distinguish from the sort of agreement which is legally binding.

Once you have commercial agreement on the Heads of Terms, businesses prepare the formal contract documentation, which will be legally binding when its signed.

Here’s how. And when they can become legally binding accidentally.

The term “separate legal entity” is a fundamental concept in law that underlies business law and legal liability.

Not getting it right means that you could:

1. sign contracts which make you personally liable on the contract, when you don’t intend to
2. sign a contract with a non-existent legal entity, and make the contract unenforceable
3. sign a contract with the wrong company within a group of companies
4. sign a contract as the company, when you intend to sign as a shareholder.

And it’s all avoidable.

Here’s how

Client lists, research and development, plans and strategies, pricing models, source code, what customers will pay for a product or service, product testing, and a whole host of other information.

It’s all sensitive information. Businesses can’t function without it. It can all be protected by confidential information.

The same principles apply in commercial, employment and non-employment situations with small differences.

It applies to a wide range of information.

That’s regardless of the media that it is recorded. Or whether it is just kept in people’s heads and never written down.

What’s more, confidential information can protect information before other forms of intellectual property come into existence, or never will.