Building boilerplate clauses

In this article, we have a look at some of the important aspects that must be kept in mind when drafting boilerplate clauses.

Boilerplate clauses do not address specifics relating to the underlying transaction but rather address ancillary aspects that need to be addressed in most contracts.

 

Such clauses are often considered standard, miscellaneous provisions, but this is a very dangerous view to adopt.

 

It is not unusual for a boilerplate clause to be the cause of litigation. Since a boilerplate clause will deal with issues such as the interpretation, validity and enforcement of an agreement, it can have a significant impact on the other clauses in an agreement and on an agreement as a whole. It is important that any such impact is intentional and not the result of a boilerplate clause being included in an agreement with little thought.

Building blocks

Building blocks of Boilerplate clauses

The purpose of Compliance with laws and regulation clause is to create a contractual obligation on the Party to comply with applicable laws and regulations. Therefore, if the Party is not in compliance with applicable laws and regulations when providing the services or goods under the Agreement, the non-complying Party will be in breach of the Agreement and the other Party will then be able to rely on the remedies available as provided for in the Agreement. 

Public disclosure clauses regulate the announcement of the transaction to the public. As Provider, you would want to announce publically that you have managed to secure a new Customer. However, the Customer may want to have a say on how and when this is done.

The purpose of an Assignment clause is to regulate the situation where a Party wants to assign obligations to another party.

 

One of the main purposes of an Agreement is to create certainty. For this reason, if you contract with a Party, you don't want to discover in a couple of months that it is a different party providing the services or goods under the Agreement.

 

There are, however, situations where a Party would want to assign some of the obligations under the Agreement to, for example, an Affiliate of theirs. If this is the case, the definitions of Affiliate and Control will be important and requires careful consideration.

 

Other aspects to be addressed in the Assignment clause include provisions relating to the effect of an assignment done without consent and other situations where consent will not be required, for example, where there is a merger.

The purpose of the fees and costs clause is to determine which Party will be responsible for fees and costs for the drafting and negotiation of the Agreement, its supporting documents, and the facilitation of the execution of the transaction in this Agreement.

The amendments and waivers clause regulates the proses and requirements for making amendments to the Agreement and the process and requirements for waiving rights under the Agreement.

 

Generally, with amendments and with waivers, the Parties will require that these need to be in writing and signed by the respective Parties. This is mainly to avoid "he-said-she-said" situations.

Agreements contain various important dates and processes with the main aim to create certainty between the Parties. The notice clause determine how notices must be provided under the Agreement, to whom these must be provided and when will it be deemed to have been received by the other Party.

The aim of the Entire agreement clause is to create certainty.

 

If there is ever a dispute, you do not guess which documents and correspondences determines the actual agreement between the Parties.

The severability clause addresses the situation where a provision of the Agreement becomes illegal, unenforceable or invalid. 

The purpose of the no employment, partnership or agency is to ensure that the commercial relationship between the Parties is clear and that no obligations are created between the Parties that would typically come about in a employment, partnership or agency relationship.

 

Additionally, these clauses also provide that neither Party may give any undertaking which will create an obligation binding on the other Party and neither Party will have authority to bind the other Party to any agreement.

When entering into the Agreement with a specific Party you don't want to be blindsided by a third-party claiming a right, benefit or remedy under the Agreement. The purpose of the no third-party beneficiary clause is to avoid the aforementioned situation.

FAQs

No, each agreement is unique and there are transaction where certainly boilerplate clauses can be omitted. For example, fees and costs clauses and publicity and announcement clauses will not always be required.

Example clause

1.           MISCELLANEOUS

1.1        Compliance:  The Provider undertakes in favour of the Customer to comply with all applicable laws, regulations, rules, ordinances, codes and standards applicable to the services and products provided under this Agreement, which includes the applicable rules and regulations related to the Provider’s personnel, consultants, representatives providing services to the Customer.

1.2        Responsibility for legal fees:  Each Party will pay their fees and costs Feefor the Agreement’s negotiation, drafting, finalisation, signing, and implementation.

1.3        No employment, partnership, or agency:  This Agreement will not result in an employment, partnership or agency relationship between the Parties and the Parties must not represent that there is any employment, partnership or agency relationship between the Parties.

1.4        No undertakings:  Neither Party may give any undertaking which will create an obligation binding on the other Party.

1.5         No authority to bind:  Neither Party will have authority to bind the other Party to any agreement.

1.6        Independent advice acknowledgement:  Each Party acknowledges that:

(a)          they have been free to secure independent legal and other professional advice, including financial and taxation advice, regarding the nature and effect of this Agreement’s provisions and that they have taken such independent advice or dispensed the need to do so;

(b)          all the provisions of this Agreement follow their intentions;

(c)          they have not relied on any advice given by the counter Party’s legal advisors in the preparation, negotiation, or implementation of this Agreement; and

(d)          they have taken all reasonable actions to satisfy themselves regarding the consequences of entering this Agreement.

1.7        No third-party beneficiaries:  This Agreement is for the sole benefit of the Parties hereto and their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer on any other person or entity any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement.

1.8        Public disclosures:  All public disclosures by either Party relating to this Agreement will be subject to the following terms:

(a)          Any public disclosures must be coordinated with and approved by the other Party before release unless the announcement is intended solely for internal distribution or disclosures required to meet legal requirements beyond the control of the disclosing Party.

(b)          Despite Subsection 1.3(a), the Provider can list the Customer as a customer and describe in general terms the Services provided by the Provider under this Agreement in proposals and other marketing materials.

1.9        Amendments and waivers: 

(a)          No amendment or rescission, termination or discharge of this Agreement is effective unless it is in writing, identified as an amendment to or rescission, termination or discharge of this Agreement and signed by an authorised representative of each Party.

(b)          No waiver by any Party of any of the provisions hereof is effective unless in writing and signed by the Party so waiving.

(c)          Except as otherwise stipulated in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power, or privilege arising from this Agreement will operate or be construed as a waiver thereof; nor will any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

1.10     Notices: 

(a)          Any notice under the Agreement must be delivered by email to:

The Customer

The Provider

(b)          A notice will be accepted as given if sent by email on the same day of transmission with a receipt confirming the successful completion of the transmission.

(c)          If the notice is given under Section 1.3, a copy of that email must be immediately delivered (by hand or courier) to the chief executive or equivalent officer of the other party at the other party’s last known physical address.

1.11     Severability: 

(a)          If any provision of the Agreement is, or becomes illegal, unenforceable or invalid, the relevant provision is deemed to be modified to the extent required to remedy the illegality, unenforceability or invalidity.

(b)          If modification under the above Subsection is not possible, the provision must be treated for all purposes as severed from the Agreement without affecting the legality, enforceability or validity of the remaining provisions of the Agreement.

1.12     Whole Agreement:  The Agreement sets out everything agreed by the Parties and supersedes anything discussed, exchanged, or agreed before the Agreement’s start.

1.13     Assignment: 

(a)          This Agreement will be binding on the Parties hereto and their respective successors and assigns.

(b)          Excluding a scenario as contemplated in below, neither Party may assign this Agreement without the prior written consent of the other Party which consent may be withheld or conditioned within the other Party’s sole discretion.

(c)          A Party may assign this Agreement where:

(i)           a Party assigns the Agreement to its Affiliate; or

(ii)          in the case of a merger or acquisition of all or substantially all of the assigning Party’s assets.

(d)          Any assignment made without other Party’s consent as required above is null and void and of no effect as between the Parties.

1.14     Interpretation: 

(a)          In the event of any inconsistency between the body of this Agreement, the related schedules and any other documents incorporated herein by reference, the following order of precedence governs

(i)           first, this Agreement, excluding schedules;

(ii)          second, the schedules to this Agreement;

(iii)         and third, any other documents incorporated herein by reference.

(b)          When interpreting the Agreement, and there are words or expressions defined in a Section, Sub-Section or clause then, unless the application of any such word or expression is specifically limited to that Section, Sub-Section or clause, the words or expressions will bear the meaning assigned to such word or expression throughout this Agreement.

(c)          When interpreting the Agreement, the following is important an expression which denotes:

(i)           Any gender includes the other genders;

(ii)          A natural person includes a juristic person and vice versa; and

(iii)         The singular includes the plural and vice versa;

(d)          A Party includes a reference to that Party’s successors in title and permitted assigns.

(e)          When reference is made to a specific time, the applicable time zone is CAT.

(f)           When reference is made to days, it means calendar days and when calculating days and the last day falls on a Saturday, Sunday, or a public holiday, the last day will be the next succeeding business day.

(g)          A reference to a month or months is a reference to a period starting on one day in a calendar month and ending on the day preceding the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that:

(i)           if the numerically corresponding day is not a business day, the period will end on the next business day in that month (if there is one) or the preceding business day (if there is not); and

(ii)          if there is no numerically corresponding day in that month, that period will end on the last business day in that month;

despite the above, a period commencing on the last business day of a month will end on the last business day in the next month or the calendar month in which it is to end.

The Author

Martin Kotze

Martin Kotze is a commercial lawyer with over 10 years of experience. He specialises in transactional work within the Tech, Financial Services and Property industries. 

He is also one of the co-founders at DocNinja and regularly advises companies on how to contract better with their customers and vendors. 

This is a free 30min consultation to better understand your business and your needs.

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martin@docninja.io

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