Contracts: Understanding Boilerplate Clauses

Contracts: Understanding Boilerplate ClausesEvery contract should be drafted to fit the specific agreement made between the parties, but most contracts contain certain “boilerplate” or basic contract provisions. A boilerplate clause typically follows a standard format and they contain carefully drafted language to ensure the provision will be upheld by the court. It is common for parties to skip over and not read boilerplate clauses which results in them not understanding what they have agreed to.

The following are a few examples of boilerplate clauses that may appear in your contracts. It is important that you understand these provisions in order to avoid an unintentional breach of the agreement as well as a lawsuit.

Indemnification Clause

Indemnification means one party is protected from certain actions of the other party. An indemnification clause can protect you from negligence, misconduct or wrongdoing by the other party that you are not involved with. Having this type of protection can be significant, especially if contractors and subcontractors will be performing the services.

Merger and Integration Clause

Most contracts contain a statement that the entire agreement between the parties is what is outlined in the written contract. This is commonly referred to as the “entire agreement clause.” It is an important provision because it makes it difficult for the parties to enforce any oral agreements that were not included in the written document. The court considers the only binding agreements to be within the four corners of the contract.

Time is of the Essence Clause

Many contracts have deadlines established and the failure to meet the deadline can constitute a breach of the contract. A provision stating that time is of the essence typically details the damages that are available to the non-breaching party if the deadlines are not timely met.

Liquidated Damages Clause

If actual damages for breach of the contract (such as failure to deliver or perform) are difficult to calculate, liquidated damages can be granted to the non-breaching party.

There are numerous other types of boilerplate clauses that can be included in contracts. It is important to read and understand each of these provisions. And remember, you are not obligated to agree to boilerplate clauses as they are written, so negotiate the language in them just as you would any other contractual provision. If you don’t understand any part of the contract, contact one of the business attorneys at Swenson Law Firm.

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