No one particularly loves boilerplate legal terms. Tom Hanks captured the view in his comparison of reading a script to reading a boilerplate legal document—equally boring. So why do boilerplate terms exist?
In short, boilerplate terms exist to control uncertainty. This blog has covered how even minor variations in standard terms can create risk for contracting parties. This post will look at the reverse condition—when and why relying on boilerplate terms can make sense:
- Entire Agreement. An entire agreement clause—also known as a “merger” or “integration” clause—limits the contract to the four corners of the document (in most cases). While the language can vary (and should be reviewed carefully), any contract worth its salt should have an entire agreement clause. For contracting parties, the presence of an entire agreement clause gives them reassurance that oral promises, email and text exchanges, and other extraneous details won’t become part of a contract. With strict KPIs, finite time and legal budgets, this certainty is invaluable. This is a boilerplate term that rarely needs negotiation—but confirmation.
- Governing Law. Governing law says which laws are used to interpret an agreement. This clause is usually paired with a dispute resolution clause, stating where any dispute regarding a contract will be litigated. These are technically separate concepts, but are usually addressed together. “Reasonable efforts” may mean something slightly different in Texas and New York. A non-compete term may either restrict a party or be null and void, depending on which governing law applies. Accepting the other side’s defaults here means accepting their home turf—both legally and geographically—if things go wrong.
- Assignment. Assignment clauses answer important questions about the future of a contract. Will one party be able to sell its rights to a collections agency? If one party is acquired or restructured, does the contract go to the new entity? Unlike most other boilerplate terms, assignment clauses are not one-size-fits-all. Broadly speaking, they fall into three buckets: (1) requiring prior approval for either party to assign; (2) requiring prior approval only for the non-drafting party to assign; and (3) allowing either party to assign with written notice. While their certainty value is real, assignment clauses should be read and negotiated carefully.
- Notice Clauses. When something goes wrong, you need to know whom to contact and how to contact them. This is where the notice clause comes in. The notice clause states clearly how contractual notice is actually given. Not having a standard notice clause can create all kinds of logistical hurdles, making enforcement of rights difficult. Many jurisdictions require notice to satisfy service-of-process requirements. A well-drafted notice clause benefits whoever needs to enforce their rights first. Standard language here is usually fine; the practical priority is making sure the mechanics actually work when the moment comes.
Closing Thoughts
While much maligned, boilerplate terms offer certainty in the stormy waters of dealmaking. Parties know what they are getting with these terms. They can thus focus on bigger commercial fish. Although even boilerplate must be read carefully for surprises, the standard language provides both control and efficiency. That is worth every bit of a boring read.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.