Boilerplate clauses in a business contracts are provisions which are not necessary to form part of the business deal but which are necessary to give some form of protection for a party, which explain certain method or procedures which may arise as per the contract or business relationship or to lay out the legal circumstances. These clauses are required negotiation between the contracting parties, legal advisors.
2) Common Boilerplate Clauses:
1. Agreement survives completion clause:
This explains that the contract remains effective following completion.
2. Announcements clause:
This clause sets out the places regarding declarations and publicity with respect to deal and the business relationship of the parties. Without this clause, any party is free to announce this information if they wish. This clause provides for whether declarations can be made, whether they need to be mutually agreed, if consent is required or not and so on.
3. Audit clause:
This clause allows to a party to check other party’s books of accounts and statement of records to the extent they related to the business deals. For e.g., a customer can check the books of accounts and statement of records of the supplier to the extent of business deal.
4. Assignment clause:
This clause does not allow the parties from assigning the benefit of the contract to a third party. As per English Law, all the rights under the contract can be assigned without the consent of other party, which may cause a problem where the contacting parties wishes to say something in who they are entering into a relationship with. This clause also sets out a different position for each party.
5. Break clause:
This clause decides when a party is qualifying to break the contract and also decides the process for this.
6. Conditions precedent clause:
This clause sets out any terms and conditions which must be fulfil before a contract or a clause in a contract takes place.
7. Conditions subsequent clause:
This clause provides that the contract will end if a specific event happens or does not happen.
8. Change of control clause:
This clause sets out the position if there is any change of control of one of the parties.
9. Conflict clause:
When a transaction involves various documents, then there is always a risk that some irregularity will arise. Sometimes irregularity could arise between the clauses in one contract. This clause aims to stop something to be happen by stating which document or clause will replace another. It is can be seen in the joint venture agreement. Short, simple contracts does not require this clause because irregularity will not be an issue.
10. Confidentiality clause:
This clause explains any confidentiality function by any or all the parties into the contract. Without this clause, only limited security is given under the English Law and this may not be sufficient for the parties. Such clause describes what is set as confidential information which may include business secrets or information, financial information, suppliers or customers information and when it can or can not be reveal. This clause also sets out what is to happen to any confidential or secret information after the termination of the contract.
11. Consequences of termination clause:
This clause is sets out the parties respective duties after the expiry or termination of the contract.
12. Contractual lien clause:
This clause allows a creditor under the contract to keep the goods owned by the customer until the amounts owed to the creditor are paid often stops the customer to sell those goods if the customer is in default.
13. Costs clause:
Who pays the costs incurred in preparing the contract and any other documentation? Each parties pays its own costs and this is often phrasing seen in a costs clause, but it may not always be the case.
14. Counterparts clause:
For the effective contract, a contract must be signed by each party. The parties are unable to meet to sign the same document and so they sign in separately. This clause ensures that all the signed counterparts when put together frames the complete, signed agreement.
15. Cumulative remedies / rights clause:
This clause declares that any rights and remedies given in the contract apply parallel to any rights and remedies which will apply under law. This clause is not strictly necessary but it does focus the mind on whether you wish to exclude any non-contractual remedies, such as misrepresentation where there has been a breach of warranty.
16. Currency clause:
This clause sets out the currency to be applied to any monetary amount mentioned to in the contract and also the exchange rate to be used if any currency conversion is required.
17. Dispute resolution clause:
The contracting parties may not always want that their disputes to be solved by the courts so Alternative dispute resolution procedure comes into the picture such as mediation or arbitration which may be preferable. It is a good idea to discuss dispute resolution options at the drafting and negotiation stage to avoid the agreement when the relationship may have broken own.
18. Duration clause:
Where a contract is to be valid for a certain period of time or for a specific work, this will be set out in duration clause.
19. Force majeure clause:
This clause provides for the situation where an event has occurred that is beyond the control of the parties which is also called an “Act of God” which may includes earthquake, floods, epidemic etc. The clause sets out what will happen if any of these events takes place or occurs.
20. Indemnity Clause:
A promise by one party to another party to pay any specific amount which is incurred by another party as a result of a given situation or event.
21. Interest clause:
This clause decides the amount of interest to be paid on the contract price in the event of delay in payment.
22. Joint and several liability clause:
Where contractual duties are shared between two or more parties for e.g., when there are many sellers under a share purchase agreement, this clause will be required to explain whether their duties are owed jointly, severally, or jointly and severally. When the joint liability applies then each party is responsible for discharging their respective part of the duty.
23. Notices clause:
This is a practical clause which sets out how any notices under the contract can be given to the other party if required.
24. Process agent clause:
This clause is required only if an overseas party is involved. This clause appoints a local process agent to deal with any claims made under the contract.
25. Set-off clause:
The parties may wish to prevent a liability under the contract which is owed by one party to be set off against the liability owed by another party.
26. Survival of terms clause:
Certain clauses of the contract may need to continue even after the termination or the expiry of the contract. This clause provides which clauses will continue once the contract has expired.
27. Service of process clause:
This clause explains the process to be used for serving legal proceedings in respect of the contract.
28. Time of the essence clause:
Where “time of the essence” in relation to a certain action or duty, any delay in performing the action or duty which result in the other party has an immediate right to terminate the contract.
29. Variation clause:
This clause explains that how the contract can be amended at the later date. This must be in writing and signed by the parties. Without the inclusion of this clause, contract can be amended by simple agreement and so could be varied orally, resulting in uncertainty and disagreement between the parties.
30. Waiver Clause:
In this clause, the party may wish to give up on a right or remedy under the contract. Any such give up need to be given in writing and is applicable only in certain situations.
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