Standard clauses, also known as "boilerplate" provisions, are general contract provisions that may be found in various agreements.
These standard clauses may increase efficiency, reduce time and money spent on drafting, and ensure consistency across agreements. However, sometimes standard clauses are included into contracts without due consideration of their legal effects.
It is imperative that parties review and understand standard clauses to avoid future legal disputes.
In this post, we will look at boilerplate provisions that are typically found in agreements and explain the purpose of each clause. It is important to note that this list is not exhaustive and that there are many other standard clauses used in contracts.
This clause places a restriction on a party's right to assign or transfer his or her rights and obligations under the agreement to a third party.
The agreement may state that it terminates should either of the signing parties cease to exist, or it may allow a party to assign its right to a new entity.
Any assignment should be in writing and signed by both parties.
Neither party to the Contract shall assign the Contract as a whole without written consent of the other.
Binding Effect Clause
The purpose of this clause is to allow the agreement to benefit, if applicable, successors, administrators, heirs, affiliates, and assigns of the parties signing the agreement.
Generally, the assigns are subject to the prior written approval of the other party.
This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors and assigns.
Dispute Resolution Procedures Clause
The purpose of this clause is to resolve disputes or ambiguities arising from the agreement by various mechanisms including court of law, arbitration, mediation, and negotiation.
In British Columbia the general mechanism utilized by parties is an alternative dispute resolution (ADR) clause.
In comparison to resorting to court, ADR can be an inexpensive alternative and a quick way to resolve a dispute.
Any dispute, controversy or claim arising out of or relating to this contract including any question regarding its existence, interpretation, validity, breach or termination or the business relationship created by it shall be referred to and finally resolved by arbitration under the Commercial Arbitration Act, R.S.B.C. 1996.
Entire Agreement Clause
This clause provides certainty and defines what is and is not part of the agreement.
It states that the agreement, including any attachments or schedules, represents the entire agreement between the parties, and any prior emails, faxes, telephone conversations, etc. are not part of the agreement.
This means that anything that has been asked or agreed to by the parties must be in writing.
This Agreement constitutes the entire agreement between the parties with respect to, and supersedes all prior negotiations, agreements and understandings between the parties concerning, the subject matter hereof.
Governing Law Clause
This clause allows the parties to choose the law that will apply to resolve disputes arising from the agreement or the relationship between the parties.
It is advisable to choose a jurisdiction under which you are familiar, i.e. your own province and country.
This Agreement shall be governed by, and construed and enforced in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein.
This clause states that the headings used in the agreement are for convenience only and are not intended to be part of any interpretations of the agreement.
Any uncertainty or ambiguity with respect to any provision of this Agreement shall not be construed for or against any party based on attribution of drafting to either party. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
This clause states that if certain parts of the agreement are found invalid or unenforceable, those parts may be severed, and the remaining portions of the agreement survive and remain in full force and effect.
The provisions of this Agreement are severable, and if any provision shall be held invalid or unenforceable, in whole or in part, in any jurisdiction, then such invalidity or unenforceability shall affect only such provision, and shall not affect such provision in any other jurisdiction.
The survival clause states that certain clauses survive the termination of the agreement. Typically, clauses that would survive consist of those relating to warranties and indemnities.
The representations, warranties, and covenants of the parties contained in this Agreement will survive the termination of this agreement.
Time is of the Essence Clause
The purpose of this clause is to confirm the parties' intent as to the importance of timeliness.
Failure to perform in a timely manner allows the non-defaulting party to terminate the agreement.
Time is of the essence of this Agreement.
This clause generally states that if a party fails to enforce any particular clause in the agreement due to inaction, silence or conduct, it does not mean that the clause is being waived and that it is no longer part of the agreement.
Any provision of this Agreement may be amended or waived only with the prior written consent of the Company. The waiver of the Company of any breach of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
When in Doubt, Consult with a Lawyer
Although standard clauses generally appear at the end of the agreement, it does not make them any less important.
Parties should take caution when drafting and reviewing these clauses, otherwise they may face unintended consequences. An example of this could include a party keeping an entire agreement clause in the agreement where the party thought that a prior document would continue to apply.
To ensure that you understand the implications of standard clauses, perform due diligence when preparing such provisions and consult legal counsel if necessary.
The preceding content is for informational purposes only and does not constitute legal or professional advice. To obtain such advice, please contact our offices directly.