Transcript for:
WEEK 6, Module 11, Video 2, Understanding Boilerplate Provisions in Contracts

as we continue looking at types of Provisions that tend to appear in professionally drafted contracts we turn our attention now to the ubiquitous General Provisions sometimes known as boilerplate for reasons that I will soon explain what exactly are boilerplate contract terms literally the term boilerplate refers to plates that were made of strong boiler grade steel so they could withstand a lot of heat and that steel in printing could be used over and over again without change so newspapers back in the day for example might have a regular advertisement printed up in boilerplate and they could stick that in to the presses and use it repeatedly back in the days when type setting was more of a manual Affair so that's where the term came from it's really out of the printing business and the boiler plate itself did in fact come from boilers because of the type of Steel that was used in it the word has come to refer in publishing and in other fields to any unit of writing that can be used over and over without change and again you could see why that would be boilerplate because it's stamped into metal and you can't really edit out things that are already in the metal but in contract drafting although we use the term boilerplate it's become a nickname for this standardized General provisions and again the idea is that it's something that parties they just accept and they don't really change it and these Provisions tend to appear toward the end of a contract maybe under a heading that says general Provisions but the important thing you need to know is despite the nickname and the origin of the boilerplate nickname contract drafters can and should modify boilerplate terms when doing so would improve the deal you have a word processor there's no reason you can't change these terms and modify them to fit exactly what you are doing nonetheless this collection of General Provisions that carries around from contract to contract does as a group tend to be called boiler plays now what are going to be some of your best practices for using these General Provisions to make sure that you use them right well the first thing is to think about where you getting them from make sure that the source if you copy these Provisions or if you at least copy most of the provision make sure the source is trustworthy reliable some possibilities are prior or what we call precedent contract documents that simply means it's a contract that has worked before and therefore it becomes precedent for a new contract and lawyers love to do this they don't want to reinvent the wheel they will pick up terms from past documents and that may well happen in your office as well even among non-lawyers another reliable source for General provisions could be a legal form book which is a often it's a multivolume affair some are single volumes but the idea of a form book is these are form documents that you could take and then modify to fit your deal once again the idea is you don't have to begin drafting from scratch because the form book will give you something to start with many form book Provisions now forms are electronic that's even better because you can download them and immediately begin working in the document of course another way to find trustworthy language is consult a lawyer on the particular issue and if you have a lawyer with whom you work frequently or is familiar with your industry or your kinds of documents that is far better to make use of that legal relationship you also want to make sure that the specific type of provision that you're putting into a contract if you happen to be involved in the drafting is one that is helpful for your deal know that just because something is a general provision doesn't mean it is right for you or for your company or for whomever you are working with it turns out that not all Provisions belong in every contract so be very careful to understand what the language is you're putting into an agreement don't just put it in because well it was there before I don't know what it does if you don't know what it does find out what it does before continuing on another best practice is to make sure that the form language fits your deal as I mentioned a moment ago you can change the language just because it's called spiler plate doesn't mean it is unamendable so you might want to ask yourself does the language come from the same type of contract if it does not there are potentially words phrases and references in there that don't fit your deal in fact they may even be contrary to your deal Which is far worse so you should ask yourself just because something's a general provision doesn't mean that it doesn't have the same standards for making sense does the language make sense in light of all the other Provisions in your contract just because it's boilerplate doesn't make it any less enforcable than other parts of your agreement now I'm going to go through a long list here of common General Provisions I'll try to do it quickly and I don't want you to get overwhelmed by all of these and start pulling your hair out but I do want you to have a sense for what types of Provisions sometimes get grouped into this broad category of General Provisions one is choice of law we want to pick what substantive law will govern our particular contract another is choice of forum if a lawsuit is going to occur over this contract where will it be that might involve one side consenting to the jurisdiction of courts in a particular State especially if they don't deal in your state where the courts are very often and you might also want to specify the place of performance of a contract because in much litigation that has been held to be a point of contact where courts might acquire jurisdiction over a party anyway because they performed a contract there by virtue of the fact that that's what was specified in the document another dispute resolution we visited this in a couple of places mediation arbitration if you want to make these things mandatory the general Provisions are often a place to do that once again though make sure that this is what you want mandatory arbitration could be a great thing and it might be a common thing in your industry but if you think you might have buyers remorse about it later then you might not want to put that in a merger Clause is a common General provision this is language that we'll look at an example of in a moment that essentially says this writing only this writing and nothing that has come before it whether oral or written is a part of this deal and parties will do this to try to bolster the intent that nothing but the writing is what their contract consists of an amendment provision will sometimes be in a contract parties will often specify that amendments to the contract can only be in writing that provision is not always enforcable but it is definitely something that parties will do in their common boilerplate terms anti- waiver Provisions this is another area that may or may not work but hey it's worth a try parties are concerned that if they let their rights slip by on a contract a certain number of times that they'll be found to have waved those rights that they don't get to enforce them anymore and there are certainly cases to that effect that if you sleep on your rights eventually you with regard to a contract you you give them up and so an anti- waiver provision is meant to bolster this by suggesting that the parties don't intend to let either side wave their rights by in action there's also a jury trial waiver this is popular in some settings an explicit statement that the parties understand that if this case goes to trial that it will not be in front of a jury a lot of businesses prefer to have their cases heard only by a judge with the judge acting as the Trier of fact as well as the decider of the law and so if both of those functions are handled by the same judge the case sometimes goes faster and to the extent parties are worried about juri's running away with things they a jury trial waiver can be helpful there are notice Provisions that go in contracts and the parties will often specify what those methods of notice are for a notice to actually be effective who it has to reach what it has to say and so forth and we'll see an example of that in just a moment a severability clause is another popular piece of boilerplate severability Provisions suggests that even though part of a contract might be held unenforceable or illegal that that will not Doom the entire contract rather the bad provision should be severed from the entire agreement and then the rest of the agreement remains in effect there can be some downsides to such a provision but it is definitely one that's very common when parties sign agreements especially nowadays they're often not in the same room at the same time and that's okay but sometimes courts are wondering whether a particular document actually does constitute the agreement of the parties maybe there are other parts that are missing or maybe people signed different versions of the document a multiple counterparts provision simply states that the parties May sign separate pieces of paper of the same contract or even one of them might be electronic but that taken together it all forms one contract the parties know that and they are okay with that sometimes parties will specify that electronic signatures are valid this is become less of an issue in recent years as such signatures become more widespread as do services that make them available in a more systematic way but that doesn't stop parties from wanting to make sure that no court is going to look back and say you better put the pen to Ink if you want to count that signature as being valid there are a number of Provisions that deal with future parties just because party a and party B enter a contract does not mean it will always be between party a and party B unless those parties put some language to that effect sometimes there will be a provision referring to successors and assigns and that simply provides that later parties are just as Bound by the contract as earlier parties so if party a signs over its rights and responsibilities to party d so now party D has a contract with the original party B that's okay under this sort of a provision now the flip side of that would be anti-assignment and anti- delegation Provisions those are explicit statements that the parties do not want someone else substituting for their role in the contract and they are common when a contract is for personal services where where the idea is no no we don't want to contract with just anybody we wanted to contract with you specifically and you can't just delegate those duties to someone else and maybe you can't even assign the rights to it so you'll see both of those types of Provisions dealing with future potential parties to a contract some boilerplate deals with headings some will say the headings are not part of the substance of the contract they're just an interpretive Aid and you might want to be careful if you've got a provision like that because a lot of people do rely on headings to define the actual meaning of the provisions of the contract but nonetheless some parties suggest that headings are only an interpretive Aid and you should just look at the sentences that follow the headings finally many contracts will contain a few spots that are rules of interpretation these are methods that the drafters hope that a court or arbitrator will follow when deciding what the contract means a very common one is to disclaim a Canon or rule of statutory construction known in Latin as Contra profero and Contra proofer simply means that the contract is construed against the drafter particularly to the extent there is an ambiguity in the contract now you can see if you are the party who drafts the contract you don't want the cannon of Contra ProForm to be affecting the way a court reviews the contract because that means the contract gets construed against you so parties will often stick a provision in a contract that disclaims that Canon and that Canon is very much alive and well so it there could be good reasons to put that in the contract also there are rules of interpretation regarding number and gender generally those account for the fact that parties make mistakes when they are editing contracts especially if they copy and paste Provisions from other contracts sometimes verb tenses will not match the singular and the plural will sometimes get crosswalked and so long as you don't get nonsensical you can probably interpret what that means a lot of times with gender a party that was a he or a she or an it or whatever pronoun you want to pick if that's being carried along nicely in the contract and suddenly the pronoun changes and that changes by accident you may want to provide that that's unintentional and the party should read it as referring to the same parties and again that may be an overabundance of caution but nobody ever accused transactional drafters of being less than cautious at least when they stop and think about it so that's a big old list of common General provisions and I hope they'll help you recognize these and other ones that might fit in that category so let's now take a few moments to look at some specific Provisions including ones I mentioned on that list what if want to avoid assignment and delegation well you need to know the background law here absent a provision to the contrary parties are generally able to transfer their contractual rights and that's called an assignment or transfer their contractual obligations which is known as delegation when parties do not want to allow substitution of one party with another and anti-assignment Clause is a useful way to do this now it's important if you're involved in drafting one of these to make sure that it's not just a breach of contract to assign the contract you want to ensure that any attempt at an assignment or delegation is void and therefore it is of no effect because if it's simply disobeying the contract then it actually is effective and the only thing you get is you get to sue the original party for breach so here's an example of such a provision assignment and delegation no party May assign any right or delegate any performance under this agreement all assignments of rights are prohibited whether they are voluntary or involuntary by merger consolidation dissolution operation of law or any other Manner and by the way sometimes assignment and delegation does take place automatically because of legal Events maybe one party goes bankrupt and another buys the assets which might include a contract this provision might or might not be enforcable in such a situation but you certainly want to give it a try if you want to avoid another party coming into play then the final sentence a purported assignment or purported delegation in violation of this section is void and that's about as good of an anti-assignment an anti- delegation as I think you could get another boilerplate provision is choice of law when more than one body of law potentially applies to a contract the parties can add certainty to their contract by stating which jurisdictions substantive law governs so think about this many times parties are in one state and they're Contracting with people in another state or maybe even another Nation it is important in those circumstances where there is any kind of doubt as to what law would apply that you specify the law in your contract now these terms as we'll see will often contain phrases excluding conflicts of law principles and including domestic contract and commercial law as safeguards and these are to help ensure that another jurisdiction's substantive law is not applied and uh without going into much detail on that I'll just tell you there's a whole body of law called conflicts of law that deals with questions as to when another jurisdiction's law might apply or the law of one jurisdiction might look to another one and if you want to make sure that none of that affects you and you're really just looking at the underlying substance then you would want a choice of law provision here is an example governing law the laws of Texas without giving effect to its conflicts of law principles including the domestic contract and commercial law of Texas govern all matters arising out of or relating to this agreement including TS that's fairly expansive and that would help guarantee that your law would be construed by substantive contract law of Texas next our severability provision that I mentioned earlier the severability provision protects an entire contract from being struck down based on only one provision in it held being held to be enforcable that sounds like a great thing however you should be careful not to preserve the contract if an essential provision is found to be unenforceable and you could easily imagine how that happens what if the provision providing that payment must be made is unenforceable do you really want the contract to continue but you're not going to get any payment what about the provision that sets out responsibilities for your employee do you want to be obligated to pay your employee but your employee doesn't have responsibilities or if you are a buyer don't you want to make sure the obligation on the sell's part to deliver Goods remains Central to the contract those are just a couple of examples but usually severability Provisions at least the way parties think about them are referring to minor side Provisions that are maybe less important to the deal nevertheless you do want to make sure that the core provisions of the contract if those are struck down that maybe the whole contract would be struck down so here's an example of a provision that would do that severability if any provision of this agreement is determined to be illegal or unenforceable the remaining provisions of this agreement remain in full force if the essential provisions of this agreement for each party remain legal and enforceable now we could stop the provision right there at the period but if we want to be extra careful we could go on with the next sentence without limitation the parties agree that the following Provisions are essential sections AB C and D or whatever sections we're referring to here and that's a way of specifying that there are certain things you do not want uh struck down with the rest of the contract being preserved and so I think this would be a fairly good severability provision next on our Hit Parade mer the merger clause in the law of contracts as some of you know from having taken a course on contracts the parole evidence rule will prevent parties from contradicting or adding to a written contract with past or present statements if the parties intend for the writing to be their complete agreement that's what the parole evidence rule does but but parties often want to bolster the parole evidence rule and one way that they have done that to effectively demonstrate that their real intent was to keep a the contract to be the writing as the entire agreement is with a merger clause and it is called that because all other negotiations and Agreements are merged out of existence and into the final written document that is in the Ethereal sense is what happens everything else disappears and becomes merged into this single document and that document is the Beall and endall as of the moment of entry into the contract now you need to be careful when writing or adding a merger Clause into a contract that you don't inadvertently wipe out other contracts between the parties because if you say that no earlier deal are enforcable that might knock out some things that you fully intend to remain enforceable so do be careful that you don't use your merger Clause like an atomic bomb that blows up everything that ever came before it you do want to specify exceptions when necessary and here's a typical sort of a merger clause or called a complete agreement Clause here this agreement is the final Fin and exclusive agreement between the parties on the matters contained in this agreement by the way that's one way to keep it from getting and grabbing other agreements you're saying just the just the subject matter of this agreement is what's affected all earlier or contemporaneous negotiations and agreements between the parties on the matters contained in this agreement are expressly merged into and superseded by this agreement and that's a pretty good example of a merger Clause the intent being don't tell me about your oral negotiations or he said she said about anything with the deal only the writing matters at least as of the moment of the making of the [Music] contract now that counterparts and Amendment section I mentioned earlier deals with the fact that at least traditionally the United States legal system sometimes would insist upon or prefer the original contract for purposes of enforcement of a breach of contract claim that has changed in recent years and the laws of evidence that caused that outcome have changed somewhat around with it nonetheless you will still frequently see a counterparts provision to ensure that the parties are not required to create a sing singular original by signing the same sheet of paper as one another and here's an example of that the parties May execute this agreement in one or more counterparts Each of which is an original and all of which constitute only one agreement between the parties so if you have two identical documents and one has party a signature the other one has party B signature that's fine now the Amendments provision deals with something a bit different parties sometimes and only I should add with limited success seek to limit the means by which parties can modify their agreement and they put in an amendments Clause now you should be aware this provision really can't stop parties from changing their deal orally if that's what they really want to do and decide to do it and a court finds that that's what they did nevertheless you'll see this provision quite frequently amendments the parties May amend this agreement only by a written agreement that identifies itself as an amendment to this agreement and which is signed by authorized representatives of all parties so they're saying we want it in writing and we want it signed and if you don't get that waved or if you don't do something contrary to it it would probably hold up but be careful parties will often forget about this and then reach other oral side deals amongst themselves then our notice provision contracts will often require that certain acts like cancelling the contract going forward or meeting certain obligations under the contract are effective only upon giving notice to the other party a general provision on notice will specify how notice must occur in order for it to be effective so take a look at this set of Provisions here we've got 12.1 methods of notice where each party giving or making a notice request demand or other communication must do so in writing and use particular methods of delivery and that has to be personal delivery registered or certified mail postage prepaid and email so you could actually make something as a method of notice that's electronic and so long as you specify that there shouldn't be a problem 12.2 specifies the people to whom notice must be given so you'll often want to list names addresses and emails there and notice that because Personnel change in institutions during the term of contracts you definitely want to be able to designate someone else later later down the road as the party for notice and then 12.3 specifies when notice is effective and since most parties want to know about the thing in order to be bound by it then a notice here is effective only if the party giving the notice has done what it was supposed to do and the designated contact has actually received the notice this is an extensive notice provision but in many respects it's fair L typical so that brings us to our wrapup Point what are some things we should remember about General Provisions first of all boilerplate General Provisions in written contracts do deal with important matters that control the party's legal relationship don't underestimate them just because they're boilerplate second despite the boilerplate imagery General Provisions can and should be modified to fit the specifics of whatever the party's deal is so never forget that you can make changes to terms even amongst the general provisions and then finally Contracting parties and their lawyers can cause inadvertent trouble by mindlessly copying General Provisions from document to document and that happens all the time but if you do it without considering the content and impact of each provision you might inadvertently bind yourself or some other party to a provision that you didn't mean to have binding so do be careful with your boiler plate sometimes there are Provisions you don't want in there that brings us to the end of this lesson on General or boilerplate Provisions in contracts