When you are reading a contract, you will notice that there are these clauses that are often tucked away at the bottom of a contract. These clauses are normally pooled under one heading- general clauses, standard, or boilerplate clauses.
Most people just skip past these clauses altogether when reading an agreement. Others may just skip its inclusion entirely. This is often because they are drafting agreements without legal assistance and on that basis, they view these clauses as wordy and unnecessary due to a lack of understanding of their function and importance.
These clauses should not be overlooked, excluded, or disregarded. General clauses are an important tool used to ensure fairness and security when contracting.
What are general/standard/boilerplate clauses?
General clauses are those clauses that do not form part of the transaction that is being captured in the agreement. Rather they serve as proactive tools that will assist parties if there are any issues and/or disputes that arise from the agreement later down the line.
These clauses deal with the ‘mechanics’ of how the contract works. In short, they address issues of enforcement, interpretation, and validity of an agreement.
In addition to assisting with the ‘mechanics of the agreement, these clauses also provide instructions on how to act in a variety of situations and they also clarify the relationship between the parties. Briefly put, they keep unwanted interpretations at bay and avoid future issues under the agreement.
Are all general clauses standard and should all of them be included?
They are considered standard because the form and intention of these clauses do not change. There is a list of clauses that are considered to be general clauses but not all of them have to be included in every contract. The transaction, the type of agreement, and the parties’ intentions will ultimately dictate which of the general clauses must be included. However, there are some that should never be excluded regardless of the above.
Some important general clauses
Let’s look at some should clauses that should always be included.
Governing law- this clause will spell out to parties which jurisdiction of law (which country’s law) will apply when there is a dispute regarding the agreement. It will also protect you in instances where the parties are not both based in the same country.
Alternative Dispute resolution- this will stop those parties who are happy to run to court for the slightest inconvenience dead in the tracks. It forces parties to use alternative dispute resolution mechanisms to try to come to a settlement first. It is also a cost-saving exercise because let’s face it, litigating is costly, lengthy and most of the time, unnecessary.
Entire agreement- this clause essentially states that everything within the four corners of the agreement contains the terms and conditions that the parties are bound to. Parties cannot rely on promises made before or after the agreement was signed (unless it is contained in the agreement). This clause is a great way of protecting yourself from outside noise.
Variations- this clause allows parties to effect changes to the contract, but those changes will only be binding if reduced to writing and signed by both parties. Those tongue-in-cheek changes won’t count unless it is in writing and all parties have signed. This is important to include as it means that the agreement cannot be changed without everyone giving it the thumbs up and accommodating those changes that may need to be made later on.
Indulgence- if one party allows for the relaxation of the other party’s obligations in the agreement, it will not be a waiver of those obligations going forward. One indulgence should not and will not create the expectation of any future indulgences.
Counterparts- this is one of the most important standard clauses to include. Agreements are no longer signed in person around a huge boardroom table or even signed on physical paper. Counterparts’ clauses accommodate those instances where the parties to an agreement to sign the agreement separately from different corners of the earth. Each signed copy separately is then considered to make one original agreement, as if they did sign together, at the same time in the same room.
We always recommend seeking legal assistance when drafting an agreement As legal advisors we know and understand the risks of excluding general clauses that may seem boring and unnecessary. When drafting we will plug those areas of potential risk for you with the use of general clauses tucked neatly away at the end of the agreement.
Therefore, if you are drafting your own contracts, be weary of leaving these clauses out. You put yourself at risk where it’s not necessary. Rather contact us at Legalese for assistance.
– Rushni Ebrahim