When negotiating a commercial contract, parties will often focus heavily on the operative clauses, such as price, payment and liability. However, the clauses typically found towards the end of a contract, often called "boilerplate clauses”, can sometimes be overlooked.
Boilerplate clauses are standard provisions focused on regulating how a contract operates. They may deal with terms such as interpretation, amendments, transferability, termination, governing law and giving notices. Such clauses appear regularly and are often not heavily negotiated.
Boilerplate clauses can help to reduce uncertainty, manage risk and avoid disputes about the mechanics of the contractual relationship.
Not every contract needs every boilerplate clause. In some cases, English law provides a workable default position without the need for express terms to be included in a contract. In lower value, short-term or low-risk contracts, a lighter touch approach may be more appropriate. However, where a party wants certainty of a particular outcome, it is usually safer to state it expressly in the contract.
This article examines three boilerplate clauses commonly found in commercial contracts.
Variation
A variation clause sets out how the terms of a contract can be changed after it is entered into by the parties. It commonly requires amendments to the contract to be made in writing and signed by and on behalf of the parties.
Under English common law, any contract can be varied by agreement between the parties as long as it is supported by consideration or executed as a deed. Depending on the circumstances, contracts can be varied informally by speech or conduct, without the need for any additional writing or a signature.
A clear variation clause provides a controlled procedure for changing the contract terms and helps ensure that important amendments are properly recorded in writing.
Variation clauses are especially important for long-term contracts where the key contract terms (such as pricing or deliverables) may change over time. A variation clause can promote discipline in contract management and reduce the risk of informal changes becoming the source of a later dispute.
Assignment
An assignment clause controls the terms on which a party may transfer or otherwise deal with its rights or economic interests under a contract. Under English law, assignment generally transfers contractual rights, not obligations. The original contracting party remains responsible for performing its obligations under the contract, unless the contract is novated.
A contract may need an assignment clause because, if the contract is silent, the benefit of the contract will generally be assignable to a third party, subject to certain exceptions. An express clause allows third parties to prohibit assignment, require prior consent, or allow assignment only in specified circumstances.
An assignment clause is particularly important where the identity, financial standing, expertise, reliability or regulatory status of the contracting party is important. For example, a customer may not want the benefit of the contract assigned to a competitor or finically weaker entity. A well-drafted assignment clause can balance these competing interests by clearly setting out what is prohibited, what is permitted, and when consent is required.
Entire Agreement
An entire agreement clause states that a written contract contains the full agreement between the parties and supersedes prior discussions, negotiations, drafts, representations or other understandings between the parties.
The purpose of an entire agreement clause is certainty. Commercial negotiations often involve emails, calls, presentations and draft documents. Without an entire agreement clause, a party could later argue that something said or shared before the contract was executed, forms part of a contract or gives rise to a claim. A properly drafted Entire Agreement clause helps define the contractual relationship by confirming that the parties should look to the signed document to identify their rights and obligations.
These clauses are particularly useful where there has been extensive pre-contractual discussion, where a new agreement replaces an earlier agreement, or where one party wants to limit exposure to claims based on pre-contractual statements.
Conclusion
Boilerplate clauses should not be treated as mere legal housekeeping as they provide an operating framework for a contract. The right clauses, tailored to the transaction, help to ensure the contract functions as the parties intended and avoids potential issues arising at a later stage.
How to Get in Contact
To find out more or if you require assistance with these matters, speak with our Contract Team on +44 (0)204 600 9907 or email info@culbertellis.com.
Accurate at the time of writing. This information is provided for general information purposes only and should not be relied upon as legal advice.
