What are Boilerplate Clauses in Agreements?
Boilerplate contract clauses are types or classes of contract provisions commonly found in contracts.
They may look the same if you're unfamiliar with them.
Slight differences in wording can make all the difference in the legal meaning and legal effect in a contract.
They're usually inserted at the end of a commercial contract. But they can appear anywhere in a contract.
Are Boilerplate Clauses Standard?
Are they standard provisions of a contract?
Boilerplate clauses are often referred to as “standard” clauses, and a bit boring.
They’re not, if you want the contract to do what you intend it do and have the legal effect that you want it to have.
The only way boilerplate clauses are standard, is that it's a common practice to include clauses of that description, especially in business contracts.
Like all contract clauses, boilerplate clauses are interpreted using the precise words used in the clause.
Although some boilerplate clauses may look the same, they can have a significantly different legal effect.
One word in the right place is all it takes to completely change the legal meaning. Like use of the word "not", or removing it where you'd ordinarily expect to see it.
When it comes to interpretation of contracts, it’s not what the parties might have intended the boilerplate clause to mean.
It’s what a reasonable reader of the contract would give it that counts. This is consistent with the well-entrenched principles of interpretation of contracts:
- Each clause of a contract needs to be interpreted within the context of the whole contract
- Each boilerplate clause has its own legal effect on its own terms
- The effect it will have within the entire contract will depend on the other clauses of the contract, along with the background in the lead up to signing the contract
Does a Contract really need Boilerplate clauses?
There's no legal requirement to include boilerplate clauses in commercial contracts. Contracts can operate perfectly well without them. Trainee solicitors know the real value in boilerplate clauses is increasing contractual certainty.
Whether it’s appropriate to include any one (or another) boilerplate clause will depend upon the contract and what you're trying to do in the contract.
Then it's a matter of making sure the wording of the clause is suitable.
Small changes in wording to a standard boilerplate clauses can make a dramatic difference to the legal effect of the contract, as you can see from the list of examples below.
And then rarely will every boilerplate clause be required for a commercial or business contract. Often it won’t make sense to include all of them.
In some cases, boilerplate clauses remove legal rights which a party would expect to have.
Knowing what they do changes the way you read contracts to work out things such as:
- the legal effect of the contract and how it's likely to be interpreted
- whether you have the rights you thought you have - or don't
- whether there a breach of contract
- whether there are rights to terminate the contract, and how they must be exercised
- whether rights to damages are limited.
They establish legal relationships in contracts with more certainty, whether for or against you.
Boilerplate clauses often appear at the end of a contract, but they don’t have to. They could be anywhere in the contract, come disguised or embedded in a long tract of text and easy to miss.
Boilerplate Clause Meanings
Here are the meaning of boilerplate contract clauses and what they're intended to do:
- Assignment Clause / Novation: transfer/ novate a contract or part of a contract to another legal entity
- Audit Clause: provide a right to inspect materials in the possession or control of the other contracting party
- Change of Control Clause: On a change of ownership or control of a party, the other party is entitled to terminate
- Choice of Law / Applicable / Governing Law Clause: sets the law which will be used to interpret a contract
- Conclusive Evidence Clause: minimise or avoid disputes in respect of calculation(s) of sums due to be paid by the paying party
- Conditions Precedent: make commencement of (1) contracts, (2) contractual obligations, or (3) benefits received under a contract, conditional on an event or state of affairs
- Conditions Subsequent: termination of a contractual duty or right, or the entire contract dependant upon a state of affairs or an event
- Confidentiality Clause: maintain secrecy of confidential information without a separate non-disclosure agreement
- Consequences of Termination Clause: expressly specifies rights and obligations - or extinguish them - when a contract ends
- Contractual Lien Clause: Establish a contractual right to withhold possession of property as possessory security for a debt
- Costs Clause: fix rights of recovery for costs and expenses of the other party for the preparation of the agreement
- Counterparts Clause: puts beyond doubt that parties may sign separate copies of a contract and be legally bound, and avoid signing the same document. They facilitate settlement when the parties are not in the same place at the same time
- Cumulative Rights Clause: expressly preserve legal rights at termination of a contract which existed before termination
- Currency Clause: designate the currency of payment of amounts under a contract
- Entire Agreement Clause: negate contractual arrangements and understandings preceding the current contract being agreed, other than where specified
- Force Majeure Clause: suspend performance of a contract during an intervening force majeure event outside the control of the parties, and/or terminate the contract
- Further Assurance Clause: promise to do things not specifically stated in the contract to support the principal performance obligations
- Guarantee: an assurance by a person who is a third party to a contract (commonly a loan) that that contract will be performed and if it's not, the guarantor will be liable for the failure
- Indemnity Clause: enhance recovery for breach of contract - usually warranties - and create a separate, standalone right of recovery for failures to perform contractual obligations
- Independent Contractor Clause: makes clear the intended legal relationship between two contracting parties to avoid the application of the Partnership Act
- Joint and Several Liability Clause: renders two or more persons jointly and severally liable to perform a single promise
- Jurisdiction Clause: fixes the courts of a recognised country in which disputes arising from or connected to the contract will be resolved
- Language Clause: sets the language for interpretation of a contract where it is prepared in 2 or more languages and/or the language for delivery of services
- Non-Reliance Clause: minimise or exclude potential liability for pre-contractual (mis)representations for the purposes of the law of misrepresentation
- Notices Clause: specified agreed methods to serve of contractual notices on other contracting parties
- Partnership and Agency Clause: prevent other contracting parties having authority to legally bind the other parties
- Precedence Clause: prioritise importance of contract terms in different parts of contracts when a conflict or inconsistency arises
- Publicity Clause / Announcements Clause: set ground rules for public statements about the contract and/or the contractual relationship between the parties
- Set-Off Clause: reduce the sum payable (or not) by a debtor arising from sums owed by the other party
- Severance Clause: delete unlawful clauses and/or parts of clauses from contracts
- Subcontracting Clause: prohibit contracting parties using subcontractors to perform contract works
- Successors and Assigns Clause: parties' assigned rights are bound by the same terms of the contract
- Survival of Terms Clause: list which clauses continue in effect after termination, and allow for continuation of other terms in the circumstances of termination
- Suspension Clause: suspend performance of a contract under specified circumstances, such as failures to pay sums due or other specified circumstances
- Term of Contract Clause / Duration: fix the time that a contract remains in force, subject to earlier termination
- Termination Clause / Break Clause: express rights for one or more parties to bring a contract to an end, such as repudiatory or material breach
- Third Party Rights Clause: prevents (or permits) the contract being enforced by third parties to the contract, to preserve privity of contract
- Time of the Essence Clause: time for performance made a condition of the contract
- Variation Clause: prevents amendments to a contract other than by an agreed method
- Waiver Clause: preserve rights for breach of contract, after an election not to exercise a contractual right
Boilerplate contracts and agreements on the other hand are pre-prepared contracts. You might call them templates.
They’re not standard terms of contract or business.
Boilerplate contracts are prepared to serve as a starting point for preparation of contract for a specific transaction. They’re edited before they’re ready for use.
That’s because very rarely are two contracts the same. Even standard terms may be prepared from a boilerplate agreement.
Boilerplate contracts are a bit like stock photography: made to meet the most popular market requirements of contracts of that sort, to sell as many as possible.
The leading providers give warnings and legal disclaimers in their own terms of business. You use them at your own risk. If something goes wrong, it's not their problem.
Boilerplate clauses on the other hand are clauses which serve as a general starting point to be used in a contract.
With many of them, it can be risky editing them without knowing what the legal effect is without knowing the reason why they’re there in the first place.
Legal Effect of Boilerplate Contract Clauses
Boilerplate clauses may have one or more purposes or effects, such as:
- extinguish or exclude claims under the contract where claims might ordinarily exist at law
- Entire Agreement clause
- Third Party Rights clause
- Non reliance clause
- grant rights to a contracting party which are unknown or not recognised by the general law
- Termination clause
- Suspension clause
- Conclusive Evidence clause
- Force majeure clause
- enable or disable entitlements which would otherwise be granted by law, by default
- Assignment clauses
- Subcontracting clause
- Audit clause
- Conclusive Evidence clause
- Contractual Lien clause
- confirm, restate, or modify the application of general rules of law to the contract
- Severance clause
- Interpretation clause
- Time of the Essence clause
- Variation clause
- Survival clauses
- Cumulative Remedies clause
- Partnership and Agency clause
- avoid the application of undesirable laws
- Choice of law clause
- Jurisdiction clause
- Variation clause
- Conditions Precedent and Conditions Subsequent
- Cumulative Rights Clause
- preserve rights that would otherwise be lost
- Variation clause
- Waiver clause
- Set-Off clause
Expert Contract Law Lawyers
The boilerplate clauses above are straightforward examples. These sorts of clauses can get complicated in their own right. We often find ourselves looking up decided case law to make sure the interpretation of boilerplate clauses like these hasn't changed.
There was one relatively recent change to the way Variation Clauses were read in the Supreme Court in Rock Advertising, in 2018.
So the way these clauses are read isn't static: and then they appear in different contracts with different terms, and they can have a different meaning again. How they're read depends upon the terms of the particular contract and the background facts of the case.
And the longer a contract gets, the more complicated they can become. Different parts of the contract can relate to one another in ways that you can't see clearly.
UK Business Contract Lawyers
We're expert solicitors: we draft business contracts.
If you're after a hand from a specialist contract lawyer, we can help you appreciate the way contracts are interpreted and how it's going to affect the business after it is signed, or what it means now that you have signed a contract and someone is looking to enforce the contract or terminate for breach of contract.
In a variety of types of contracts one party - usually involving a supplier, agent or licensee - may hold records required to properly and accurately calculate amounts to be paid under a contract.
Without access to the records, the customer (or principal or licensor) has no objective or independent method of verifying whether issued invoices have been calculated in consistently with the contractual rights granted to the supplier.
The parties may agree that the customer has the right to inspect the underlying documentation to satisfy itself that the sums charged are correct, and in accordance with the contract terms.
Example: Audit Clause
The Customer may appoint a certified accountant to inspect and audit all records relating to the sale of goods and grants of licences, calculation of invoices, and the books and accounts of the Supplier at the Customer's expense at all reasonable times and on reasonable notice.
More sophisticated versions of Audit clauses contain provisions to recoup the expense of audits where the payment calculations are more than (say) 10% or more than what they should be.
By default, the costs and expenses of a party preparing a contract are payable by the party incurring them.
If precontractual statements have been made that a party will pay the costs of the other, and a provision does not appear in the contract - it's more than likely that the precontractual promise to pay will not be enforceable. Especially when a Non-reliance Clause appears in the contract.
Where there is pre-existing agreement to pay the costs or expenses leading up to signing a contract, a costs clause puts the situation beyond doubt.
The example below says that neither party will be liable for the costs or expenses of the other. It simply confirms the default position at law. And the normal practice.
Example: Costs Clause
Each party shall pay the costs and expenses incurred by it or it in connection with the entering into and completion of this agreement.
In international trade and commerce, quotes, estimates and payments can be made in any currency. Fixing a contractual currency and the method for resolving differences when different currencies are used reduces the prospect of disputes.
Example: Currency Clause
Unless otherwise stated, all quotes and estimates are made in Sterling and all estimates and payments in foreign currencies shall be deemed to be in Sterling at the exchange rate published by Reuters at the close of business on the day that the said quote or estimate was supplied or payment made.
When contracts are made and governed by English law, the language of the contract is usually English.
One Contract, Two Languages
Sometimes a contract may be prepared in a foreign language, in language which is familiar to a native speaker of another language.
The parties are able to select the authoritative language version. The subtleties of languages and technical meanings of words may be lost or not be able to be expressed concisely in one language or another.
A master copy of a contract might be prepared and then translated for use in many different countries. Although the parties may agree that the local version of the contract applies from country to country, the parties might also choose to apply a single law to every translation. This involved two provisions:
- Clause that the English (or other language version) prevails; and
- The contract is governed by English law in any event.
Language of Services and Documents
In other situations, the contract could be written in English, and:
- performance of services may need to be in another language, such as:
- applications to regulatory authorities such as trade mark applications
- regulatory approvals in countries
- specifications for construction works
- powers of attorney
- assignments of rights
where English is not an official language of the country.
- services, such as support desk services may need to be performed under the contract with end users located in non-English speaking countries. Leaving it open may give rise to an implied term that support services must be provided in all of the languages spoken in the countries served.
In cases such as these, it can be important to know which version of the contract prevails or the languages in which the services must be provided.
The parties may prefer:
- a single language documents to prevail over others
- support services to be conducted in one or more specified languages
Example: Language Clause
- This contract is made in the English language. Where the is any conflict in meaning between the English language version of this agreement and any version or translation of this agreement in any other language, the English language version shall prevail.
- The services shall be performed in English and [no other language | French]
A Publicity clause or Announcements clause set out to regulate what one party may say about the other in public messaging and communications.
When the existence of the contract is to be secret, or the terms of the contract are to remain confidential, they usually appear with confidentiality clauses.
Example: Publicity clause / Announcements Clause
No announcement or information concerning this agreement or any associated matter shall be released or authorised in any advertising, publicity, promotional or other marketing activities without the prior written consent of the other party. Consent not to be unreasonably withheld or delayed.
The default rule is that contractual obligations cannot be assigned without the consent of the other party.
When they are, Successors and Assigns Clauses are intended to make clear that if the obligations are novated to another person, the obligations will apply to that person.
In contracts governed by English law, these clauses put it beyond doubt that the party to whom the contract is transferred will be bound by the contract.
For example, when shares are transferred to a new shareholder, the shareholder's agreement might contain a Successors and Assigns Clause, so that the new shareholder is bound by the shareholders agreement. (Note that a deed of adherence would usually be insisted upon prior to receiving an assignment of shares)
Example: Successors and Assigns clause
This agreement shall operate for the benefit of and be binding on the respective successors in title and permitted assigns of each party.
When used, it makes sense to group it with an Assignment Clause.
Parties are not entitled to suspend a performance of a contract. That's the general law.
Exceptions though may be by statute. One is s 112 of the Housing Grants, Construction and Regeneration Act 1996. (aka the Construction Act 1996). That doesn't apply to most industries.
When a party suspends work without an entitlement to do so, it's likely to amount to a breach of contract, even if the other party is in breach of contract themselves.
Rights to suspend may be established in the contract itself.
Example: Suspension Clause
Should the Customer not pay sums properly due and payable under this Agreement by the due date, the Supplier may suspend such part or parts of the Services as it sees fit on 14 days’ notice in writing to the Customer.