Orr Litchfield
Solicitors and Business Lawyers
Solicitors and Business Lawyers
This article follows our previous article (Contract terms: What entrepreneurs should know). Here, we discuss boiler plate clauses, the “standard” clauses that are usually added to the end of a contract and which deal with general legal and administrative provisions, such as dispute resolution, governing law and notices. They are often skimmed over. We bring the reader’s attention to the detail and the meaning behind boilerplate clauses and to be aware of what could go wrong if you do not adhere to their provisions.
An ‘Entire agreement’ (or ‘Whole agreement’) clause ensures that the terms agreed are limited to what is actually written in the contract. Therefore, if any verbal representations, email agreements or heads of terms have been made prior to drafting the contract, those terms will be overridden on signing the final contract and shall not be included. This is actually a useful clause to ensure commercial certainty and avoid legal obligations outside of the contract. Needless to say, ensure all terms are included as expected before you sign.
Under common law, a contract can be varied orally, which effectively negates the ‘Entire agreement’ clause. It is advisable to include a ‘Variation’ clause and provide that variation must be in writing and signed by all parties.
There is no doctrine or statutory definition of force majeure under English law. Force majeure events, for example, pandemics, extreme weather conditions, acts or directions of government etc. must be clearly defined in the contract. The events must be unforeseeable or beyond either party’s reasonable control. The force majeure event must also directly prevent part or full performance of the contract.
Under common law, parties would be expected to use reasonable efforts to avoid or overcome a force majeure event. Ensure a force majeure clause is drafted carefully to include all relevant force majeure events, the rights of suspension or termination of the affected party and the notice procedures for informing the unaffected party of the event.
A ‘Notice’ clause describes the procedure that a party must follow to notify the other party of a potential claim, for example, for breach of warranty. Provisions around timing, content and format must be adhered to carefully. Beware of provisions such as “must be in writing and posted by first class post.” If you send a notice of a claim via email, it would not be valid under such a clause and could therefore invalidate your claim.
The common law rule of privity of contract prevents those not a party to a contract from taking legal action to enforce its terms. The Contract (Rights of Third Parties) Act 1999 gives powers to third parties to enforce terms of a contract that confer a benefit on them. A Contract (Rights of Third Parties) clause can exclude that right except where the contract provides that a named party can enforce particular terms. This provision is typical of, for example, security documents, e.g. in a loan agreement. Always check the terms of such a clause to determine whether third parties have enforceable rights under the contract you are entering.
In cross-border contracts and/or where the parties reside outside of the UK, it is important to specify which court shall have jurisdiction to settle any claim connected with the contract to avoid uncertainty in the event of a dispute.
Similarly, the governing law should be stated to avoid any ambiguity as to which country’s laws apply to the contract. Again, this is particularly important for cross-border contracts to provide certainty and clarity to all parties.
Whether you are planning to enter into a new contract or would like us to review your existing contracts or any part of them, we can help you to plan, prepare, review and implement your contracts in a way that helps you to protect and develop your business.
If you would like more information about any aspect of commercial contract law or would like to discuss a potential or existing contract or commercial contract law matter, please email us at enquiries@orrlitchfield.com, complete an Enquiry Form or call us.
