We’re almost at the end of this series on contracts! Today, I’m focusing on some of the most common boilerplate contract clauses. If you’ve reviewed a contract in the past, you may have seen and skimmed through or skipped over them. Despite their commonality, you need to understand what these clauses mean and how they can impact your agreement.
When I talk about boilerplate clauses, I’m generally referencing the clauses that seem fairly standard in most agreements. Typically, you’ll find them towards the end of the contract.
In this episode, I focus on the clauses often found in service-based business agreements. I review what each clause means and give you some sample language to help you recognize it.
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In this episode:
[02:49] – Danielle defines the confusing concept of indemnity provisions.
[03:59] – What do you need to look at when reviewing an indemnity provision?
[04:13] – Danielle discusses disclaimer of warranties.
[04:57] – What are choice-of-law and jurisdiction clauses?
[05:45] – Agreements may include a clause regarding dispute resolution such as mediation or arbitration.
[07:32] – Assignment clauses state whether or not the parties may assign their rights under the contract to another party.
[08:20] – In many contracts, written notice to the other party is a common requirement. But how do you give notice?
[09:21] – Danielle talks about unenforceability clauses.
[09:54] – With survival clauses, certain provisions should survive after the termination of the agreement like confidentiality or intellectual property rights.
[10:25] – Some survival clauses list specific paragraph numbers. If you’re doing this, watch out for this common mistake before signing.
[11:00] – What does a waiver clause typically state?
[11:32] – Each party can sign an agreement separately if it includes a counterpart clause.
[12:09] – Single agreement clauses state that the agreement supersedes any past agreements between the parties.
[13:05] – Danielle offers some fairly simple action steps.
Links & Resources:
Welcome to the Simplifying Legal podcast, brought to you by Businessese. I’m your host, Danielle Liss.
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Hey there, I’m Danielle. Welcome to episode 15 of Simplifying Legal for Small Business Owners. In Episode 8, we kicked off a series on contracts and we’re almost at the end of the series.
In this episode, I’m focusing on some of the most common boilerplate contract clauses. If you’ve reviewed a contract in the past, you’ve probably seen them and maybe ignored them. Even though they’re really common and a lot of people just skim it, it’s important to understand what they mean and how they can impact your agreements.
Disclaimer: As always, before we get into today’s topic, a quick disclaimer. This podcast is meant to provide you with legal information only. It’s not legal advice and does not create any type of attorney-client relationship between us. Please don’t take any action without consulting your lawyer first.
Now let’s talk about the boilerplate clauses.
First, when I talk about boilerplate clauses, I am generally referencing the clauses that seem fairly standard in most agreements. For today’s episode, these are often found in agreements for service-based business owners. Contracts for goods might look a little bit different.
Usually, you will find the boilerplate clauses toward the end of the agreement. In Businessese templates, it’s usually the last few paragraphs and the section entitled Miscellaneous.
For this discussion, I’m going to review what each clause means and give you some sample language.
We’re going to start with indemnity, and this is probably the most confusing concept we’ll discuss today. An indemnity provision transfers risk. It allows the parties to state that one party will be responsible for the other party’s loss in a particular situation.
Here is a sample of an indemnification clause that might appear in a service business provider’s client agreement: Company shall indemnify, defend, and hold Client harmless from and against any loss, liability, damage, or expense, including reasonable attorney's fees, incurred or suffered by or threatened against client that result from Company’s negligent actions or Company’s breach of this Agreement.
This particular clause essentially means that the Company will be responsible for any damages incurred by client that result from the company’s negligent actions or its breach of the agreement.
There is no doubt that indemnity clauses have a lot of legalese and the example above is very simple. Indemnification can be an extremely tricky area of law. When you are reviewing an indemnity provision, look to see who is responsible and what event triggers that transfer of risk.
Disclaimer of Warranties Clause
Next, let’s talk about disclaimer of warranties.
Many agreements include a disclaimer of warranties, which specifically states that there are no applicable warranties regarding the contract. You can usually spot these from the words “as is” or it will state that they are disclaiming any warranties.
Here’s a sample of a disclaimer of warranties clause:
Company hereby disclaims, all other representations and warranties, express or implied, including without limitation any implied warranties of merchantability and/or fitness for a particular purpose. The services are being provided “as is,” without any type of warranty whatsoever.
A company may include this type of clause to limit any breach of warranty claims.
Choice of Law and Jurisdiction Clauses
Next, let’s look at choice of law and jurisdiction clauses.
A choice of law clause defines which state’s law will control in the event of a dispute. Then, if it also covers jurisdiction, the clause will typically state that the parties agree to bring claims in a particular jurisdiction.
Here is a sample of a choice of law and jurisdiction provision. I’m using Clark County since I am based in Las Vegas.
This Agreement shall be governed by the laws of the State of Nevada without regard to its conflict of laws doctrine, and applicable federal laws of the United States of America. The parties agree that all claims will be brought in the courts of Clark County, Nevada.
This type of provision is extremely common in an agreement since it helps avoid disputes at a later date about which law should control and where a claim should be filed.
Dispute Resolution Clauses
Next, your agreement may include a clause regarding dispute resolution, like mediation or arbitration.
A lot of businesses like to include a provision which states that the parties must go to either mediation or arbitration to settle any disputes, rather than filing a lawsuit. Whether or not to include these may depend on the agreement and your company’s overall preference.
Here’s a sample clause that starts with mediation and then leads to arbitration.
Any and all disputes or disagreements arising between the Parties out of this Agreement upon which an amicable understanding cannot be reached shall be decided first by mediation, and if mediation is unsuccessful, then arbitration in accordance with the procedural rules of the American Arbitration Association. The Parties agree to be bound by the decision of the arbitrator(s). The arbitration proceeding shall take place in Clark County, Nevada, or another location is mutually agreed to by the Parties. The cost and expenses of the arbitrators shall be shared equally by the Parties. The prevailing party in the Arbitration shall be entitled to recover from the non-prevailing party all reasonable costs incurred. The Parties agree that the arbitrator will determine the definition of the prevailing party for purposes of this clause.
This is a relatively simple example. This type of clause can get way more complicated, especially for mandatory arbitration. If you are reviewing this type of agreement, make sure you know what the process would be in the event of a dispute.
Next, let’s discuss assignment clauses.
In Episode 13, we talked about content ownership and the concept of assignment of copyright rights. In this case, assignment is a bit different.
For this type of assignment provision, instead of discussing copyright rights and content ownership, the clause states whether or not the parties may assign their rights under the agreement to another party.
Here is a sample assignment clause:
This Agreement shall not be transferred or assigned to any third party, in whole or in part, by Client without the express written consent of Company.
This type of clause may be mutual or affect only one party. If you may need to assign your rights under an agreement, make sure you can do so under the agreement.
Now, let’s look at a notice provision.
In many agreements, it may state that written notice to the other party is required. A common example is a termination provision. But, how do you give notice?
The notice provision will typically dictate how notice can be given. The notice paragraph may include where to send the notice, or it may reference contact information in the signature block.
Here is a sample notice provision: Except as otherwise provided herein, all notices that either party is required or may desire to give the other party shall be in writing to the addresses in the signature block. Electronic mail is permissible, but will only be considered sufficient notice if the non-sending party affirmatively confirms receipt.
If there is a notice provision, make sure you know whether or not email is permissible for providing written notice.
Next, let’s look at unenforceability.
This type of clause provides that if any paragraph within the agreement becomes unenforceable or illegal, the remainder of the agreement will remain in full force and effect.
Here is a sample unenforceability provision: If any of the provisions of this Agreement is or becomes illegal, unenforceable, or invalid (in whole or in part for any reason), the remainder of this Agreement shall remain in full force and effect without being impaired or invalidated in any way.
Next are survival clauses.
This type of clause states that certain provisions should survive after the termination of the agreement, such as confidentiality or intellectual property rights.
Here is a sample survival provision: Any rights or obligations contained herein that by their nature should survive termination of the Agreement shall survive, including, but not limited to representations, warranties, intellectual property rights, indemnity obligations, and confidentiality obligations.
Some survival clauses will list specific paragraph numbers, or it may say the type of clause, like the sample above. If you are using specific paragraph numbers, make sure these match before signing. If you’ve modified the agreement and removed or added paragraphs, it may change the numbering.
Next, let’s look at waiver clauses.
This type of clause states that a failure to enforce any provision won’t be construed as a waiver of the right to enforce it at a later date.
Here’s a sample of a waiver provision: Any failure of either party to enforce any provision of this Agreement, or any right or remedy provided for therein, shall not be construed as a waiver, estoppel with respect to, or limitation of that party’s right to subsequently enforce and compel strict compliance or assertion of a remedy.
Next, let’s look at counterpart clauses.
This type of clause states that the agreement can be signed in counterparts, which means that each party can sign separately. It might also state that the parties may sign electronically.
Here’s a sample: The Agreement may be executed in several counterparts, all of which taken together will constitute one single agreement between the Parties. The Parties expressly agree that with respect to this Agreement, a facsimile or electronic signature or executed document which has been formatted as a Portable Document Format (PDF) and electronically exchanged shall be binding upon the Parties.
Single Agreement Clause
Our last clause is about the single agreement.
This type of clause states that the agreement represents a single agreement and that the agreement supersedes any past agreements between the parties.
An example of this type of clause is: This Agreement, along with all attachments, represents a single agreement, as well as the entire agreement with respect to the subject matter. This Agreement supersedes any prior agreement between the parties, whether written or oral, with respect to the subject matter, and may be modified or amended only by a writing signed by the party to be charged.
Be cautious with this type of clause. For example, if you had a verbal agreement with the other party and the terms aren’t properly reflected in the agreement, then it likely won’t be admissible. When you see this type of clause, make sure that the agreement covers all of the terms that it should.
This wraps up the review of the clauses. Now let’s move to today’s action steps, which are fairly simple.
- Do you have boilerplate clauses in your agreements? Is anything missing? If it makes sense for your business, add any clauses you need.
- Do your existing clauses make sense for your business? If anything needs to be updated, consider making those changes.
Thanks for joining me for today’s discussion on boilerplate clauses. In the next episode, I’m wrapping up the contracts series with some q&a that I’ve received from listeners about the episodes.
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