Don't Get Burned By "Boilerplate"
I recently met with a prospective client to discuss representing him in a possible business venture. As we discussed the scope of my representation, he said that he planned to sign some “standard” contracts with various venders and that he would not need my help because, other than the price terms, it was all “just boilerplate.” But, as I explained to my now client, the ill-advised business person can get burned by boilerplate.
The term “boilerplate” comes from the old days of newspaper production when syndicated portions of an issue were distributed on plates made from molten metal – boilerplate – so that could be easily reproduced without changes. In modern usage, boilerplate refers to language that is standardized within contracts of a certain type. Boilerplate exists to save parties the time and trouble of having to negotiate details that are often assumed and accepted, thereby allowing them to focus on the key issues.
Unfortunately, in many instances, boilerplate is slanted heavily in favor of the party drafting or providing the contract. Given that word-processors allow pretty much anything to be changed these days, the savvy businessperson shouldn’t just accept the assertion of “oh, it’s just boilerplate.”
So, how can boilerplate affect your legal rights? Let’s look at some of the more common examples.
Choice of Law and Venue. Choice of law refers to what state’s law will govern the contractual relationship. Many “standard” contracts will contain provisions stipulating that the law of another state will control. For example, the Uniform Commercial Code is a “model” statute adopted by most states that tries to bring fairness and certainty to the sale of goods. But not all states have adopted the latest version or all of its provisions, and in certain instances various states have amended the UCC in ways that might be significant to one party to the transaction.
Venue refers to the physical location where any litigation arising from the contract will take place. Boilerplate might stipulate that you agree to litigation in a foreign jurisdiction like New York. All too often this location is the hometown of the other party. Further, litigating in New York City is going to be exponentially more expensive than in Sangamon County, often so much so that it’s not practical to do so. If the other party won’t agree to have venue established in a more attractive location, it’s possible to strike the provision entirely and leave the issue to be decided by the courts – where you at least will have a fighting chance to litigate in a more favorable location.
Attorneys’ Fees and Costs. Unlike in the United Kingdom, the losing party in America does not necessarily pay the winning party’s attorneys’ fees and costs. Rather, each party bears its own litigation fees and costs unless they agree otherwise in a contract or if there is a statutory provision (usually in the consumer protection arena) to the contrary. Absent a provision that the loser pays the winner’s fees, it’s often not economically feasible to litigate – especially if you’ve inadvertently agreed to do so in the Big Apple. In addition, I’ve sometimes even seen one-sided boilerplate that says only the other party gets its fees and expenses if successful in litigation. If you aren’t the dominant partner in the business relationship, pay particular interest to this type of boilerplate.
On the other hand, there are also situations where you might not want an attorneys’ fee provision in a contract. Imagine you are a small business and your customer is a mega-company. Your customer likely uses a large law firm with high-priced lawyers. If you somehow breach the contract and are sued, you might end up paying more in attorneys’ fees than in contractual damages.
Entire Agreement. This type of language usually says something to the effect that the contract contains the entire agreement of the parties and supersedes any prior oral or written agreements. If such language is included in the boilerplate, it means that you likely can’t claim to have relied on any representations or other agreements that aren’t specifically included in the contract. Accordingly, if such language is included, make sure all promises and representations are included in the contract or they won’t count.
Arbitration/No Jury. Many contracts contain clauses in which the parties agree not to litigate in the courts, but rather to submit the dispute to arbitration. Certain types of arbitration, however, can be just as expensive and time consuming as litigation. And, in some instances, the deck may be stacked against you - especially if the provision stipulates an arbitrator that might be favorable to the other party. Arbitration can sometimes be useful for very technical matters, but not as much for general legal disputes. Also, with arbitration, there are often limited or non-existent avenues for appeal.
Other boilerplate can include a waiver of the right to a jury trial. Non-jury trials tend to be less expensive, but there may be instances where you want the benefit of a jury’s viewpoint.
Notice Provisions. Standard contract language often identifies the precise form and manner by which notices must be given to the other party, such as notice of default. Make sure that you read, understand and follow the requirements.
Modification. Many contracts provide that they can only be changed in a written agreement signed by all parties. If you have such a provision and ask for and receive a change to the contract, make sure to follow the procedure set forth. Otherwise, it’s likely that the change will not be enforceable.
These are some of the more common, but not the exclusive, types of “boilerplate” that can significantly affect your legal rights. Don’t assume that the language can’t be changed. Do make sure to read all the language in a contract – especially that appearing at the end or in small type. And, when in doubt as to meaning or effect, consult with your lawyer.
by Thomas C. Pavlik, Jr.