A boilerplate provision is a standardized term in a contract that usually appears near the end of the document in a section called “General Terms” or “Miscellaneous.” These are common clauses that pop up in almost every contract and dictate general practices. Despite how unassuming or routine they may seem, it is important to pay attention to all boilerplate provisions in any contract you sign on behalf of your company. Every single element in a contract can be negotiated—even boilerplate provisions.
Here are seven common boilerplate provisions you should pay attention to in your company’s contracts:
1. Choice of Law clause. This clause determines which state’s laws will be upheld if the contract is breached. Laws vary from state to state, and some could favor your company more than others. However, the state chosen must have some sort of connection to your contract.
2. Jurisdiction clause. This clause determines which state a lawsuit must be filed in if a contract is broken or breached. This is important if the two parties in a contract are located in different states. It is definitely easier and financially beneficial to deal with the courts in your home state.
3. Confidentiality clause. This clause lays out whether one company in a contract is allowed to speak publicly about their work with another company. This is common with work involving products, where secrecy is of the utmost importance before it is announced and released. Confidentiality clauses also protect one or both parties from disclosing trade secrets or other proprietary information to third parties.
4. Force Majeure clause. This clause, translating directly to “superior power” in French, determines whether or not parties to a contract are exempt from performance under the contract if an unforeseen event arises. This determines, for instance, whether or not your company would still have to follow your obligations in a contract if your office was destroyed by a hurricane or other unforeseen natural disaster. The ongoing COVID-19 pandemic has put a spotlight on force majeure clauses.
5. Amendments clause. This clause determines whether changes are allowed to the contract.
6. Escrow clause. This clause determines whether the money exchanged in a contract should be held in a separate bank account (escrow account) during the contract’s execution. If this is the case, this clause determines under which circumstances the money inside of that account may be accessed before the completion of the contract.
7. Notice clause. This clause determines the way in which formal and legal communication is handled between the two companies. It also determines in which circumstances it is necessary to notify the other company. For instance, how should one party be notified if another party wishes to terminate its obligations under the contract?
Conclusion
Boilerplate provisions may seem unimportant because of their universal appearance, but they actually affect your rights and obligations in fundamental ways. It is important to pay attention to them and make sure they represent your company’s best interests. If you have any questions about contracts or other legal contracts, contact The Anderson Firm, LLC today. We serve the Atlanta area’s best and brightest!