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What boilerplate language should a contract have?

Pen laying on unsigned contract. Does it include necessary boilerplate?

You need to sign a contract, but you aren’t sure if you’re protected. Here are two quick pointers. First, make sure you have boilerplate language to protect all parties involved. There are sentences that pretty much all contracts should have. They are kind of like a vaccination. Having it won’t hurt. But not having it could. For example, you may never be exposed to Neisseria meningitidis, but having the standard booster shot (which includes this vaccination) is still a good idea.

(The second pointer is don’t try to figure it out on your own. Lawyers have special training to figure out ambiguities and protect you. You may be thinking you save money now by proof-reading the contract yourself. But if there is an ambiguity, or something is missing in the contract, it can cost you dearly later.)

Here are boilerplate contract provisions that should be in almost inteevery contract:

Applicable Law. This Agreement shall be construed and interpreted in accordance with the substantive laws of the State of Arizona.

Binding Nature of Agreement; Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

Construction. This Agreement shall be construed as if drafted mutually by the parties through their respective counsel and therefore shall not be construed against either party.

Effective Date. This Agreement has been executed by the parties intending that it be effective on the effective date set forth on the caption page. The parties recognize that they effectuated a meeting of the minds among themselves on that effective date and intended that this Agreement take effect on that date even though, because of the exigencies of the modern world, the mechanics of drafting, the convenience of the parties, and the economy of travel, it may have been necessary to actually sign the document at a later time.

Counterparts. This Agreement may be executed in one or more counterparts, each of which may be executed by one of the parties hereto, with the same force and effect as though all the parties executing such counterparts had executed the same instrument. All counterparts shall be construed together and shall constitute one agreement.

Effective Place of Execution. The parties intend that the place of execution be that county and state that is set forth in the caption of this Agreement. The effective place of execution is the place that the parties intend this Agreement to have been executed incorporating all laws, for purposes of conflicts of laws, which apply to that effective place of execution. The parties recognize that, due to the exigencies of the modern world, the mechanics of drafting, the convenience of the parties, and the economy of travel, this Agreement may be executed by one or all of the parties at some other geographic location and possibly at multiple places. In spite of this, however, they intend that it be deemed executed at the effective place of execution.

*Entire Agreement. The terms of this Agreement constitute the entire agreement between the parties. The parties represent that there are no collateral agreements or side agreements not otherwise provided for within the terms of this Agreement.

Execution of This Document. All parties named in the caption as parties shall sign below and at least one of the parties shall initial all pages of all original copies of this Agreement. Furthermore, all documents such as schedules, exhibits, and like documents which are expressly incorporated herein shall be initialed by the parties and either exchanged or attached to the originals which are given to any party named on the caption page of this Agreement. It is the intent of the parties that all pages be initialed on all originals that are exchanged in order that no substituted pages or misunderstanding shall ever become possible to create problems in satisfying the intended objectives of this Agreement.

Execution of Related Documents. The parties agree to execute and deliver to the other, in recordable form if necessary, such further documents, instruments or agreements, and shall take such further action, that may be necessary or appropriate to effectuate the purposes of this Agreement.

Fair Notice of Default. The parties are desirous of giving one another fair notice of any default before sanctions are imposed. In the event of an act of default with respect to any provision of this Agreement, no party may institute legal action with respect to such default without first complying with the following conditions:

Notice of such event of default must be in writing and faxed, E-mailed or mailed to the other party by U.S. Certified Mail, return receipt requested.

Such written notice shall set forth the nature of the alleged default in the performance of the terms of this Agreement and shall designate the specific paragraphs(s) hereof which relate to the alleged act of default.

Such notice also shall contain a description of the action to be taken or performed by the other party to cure the alleged default and the date by which the default must be remedied, which date may not be fewer than 30 business days from the date of mailing the notice of default.

Force Majeure.  Neither party shall be liable to the other party for any delay or omission in the performance of any obligation under this Agreement, other than the obligation to pay monies, where the delay or omission is due to any cause or condition beyond the reasonable control of the party obliged to perform, including, but not limited to, strikes or other labor difficulties, acts of God, earthquakes, acts of government (in particular with respect to the refusal to issue necessary import or export licenses), war, riots, embargoes, or inability to obtain supplies (“Force Majeure”).  If Force Majeure prevents or delays the performance by a party of any obligation under this Agreement, then the party claiming Force Majeure shall promptly notify the other party thereof in writing.

Good Faith — Attorney’s Fees and Costs. The parties desire that each raise only good faith disputes for mediation, arbitration, or litigation. To discourage the bringing of such proceedings without a good faith reason, this provision is enacted. If, upon failure of any party to this Agreement to comply with any of the terms or conditions hereof, to enforce any payments herein stipulated, or to enforce any provision hereof, the losing party will pay to the prevailing party reasonable costs, except witness fees, and expenses, including attorney’s fees and the value of time lost by the prevailing party or any of its employees in preparation for or participating in any arbitration or litigation in connection herewith as determined by the court or arbitrator. All lawsuits under this Agreement shall be filed in the courts of the county and state where this Agreement was executed.

Interest. If, by reason of any default or act of one party under this Agreement, it is determined by agreement, mediation, arbitration, or litigation that the party owes another any sum of money, interest shall accrue on that sum at the rate of 10% per annum from the date the sum was first due until paid.

Interlineations and Initials. The parties recognize that, because of the exigencies of the modern world, the mechanics of drafting, the convenience of the parties, and the economy of costs, they may have made minor changes in their own handwriting in this Agreement. These minor changes have been initialed by all the parties, if any changes have been made, fore and aft of the change on all originals to prevent any extension or alteration of that change by any of the parties or others. Unless otherwise indicated by the placement of a date beside the change, these changes were intended by the parties to have occurred as of the effective date of this Agreement. Any interlineated changes made by the parties after the effective date of this Agreement shall be initialed by all parties and dated and have the date itself initialed fore and aft by all parties to this Agreement.

Interpretation. Whenever any word is used in this Agreement in the masculine gender, it shall also be construed as being used in the feminine and neuter genders, and singular usage shall include the plural, and vice versa, all as the context shall require.

Marginal Headings. The marginal headings of the paragraphs of this Agreement are for convenience only and are not to be considered a part of this Agreement or used in determining its content or context.

Materiality.  All covenants, agreements, representations and warranties made herein shall be deemed to be material and to have been relied on by the parties in entering into this Agreement and shall survive the execution and delivery of this Agreement.

Modification. Any modification or amendment of this Agreement shall be in writing and shall be executed by all parties.

Notices. Copies of all notices and communications concerning this Agreement shall be mailed to the parties at the addresses written on the caption pages hereof. Any change of address also shall be communicated to the other parties in writing and in English. Any document which may adversely affect the rights of any party to this Agreement shall be dispatched by fax, E-mail or U.S. Certified Mail, return receipt requested. For all documents mailed to persons in the continental United States, the time period of all notices shall begin running on the day following the date that the document is postmarked. For documents mailed to persons outside the continental United States, the time period shall begin running on the date that the document is received by the other party.

Incorporation of Recitals.  The prefatory language and Recitals made and stated above are incorporated by reference into, and made a part of, this Agreement.

Integration; Time of the Essence.  This Agreement and its exhibits and documents incorporated herein constitute and embody the full and complete understanding and agreement of the parties hereto and supersedes all prior understandings, whether oral or written.  Time is of the essence in all matters associated with this Agreement.  No representation, promise, inducement or statement of intention has been made by any party hereto which is not embodied in this Agreement, and no party hereto shall be bound by or liable for any alleged misrepresentation, promise, inducement or statement of intention not so set forth.

Partial Invalidity. If any term, condition or provision of this Agreement or the application thereof is judicially or otherwise determined to be invalid or unenforceable, the remainder of this Agreement and the application thereof shall not be affected, and this Agreement shall otherwise remain in full force and effect.

Power and Authority. Each party executing this Agreement in a representative capacity warrants to the other party that he has the right, power, legal capacity, and authority to enter into this Agreement. No approval or consent of any other person shall be necessary in connection with the execution, performance, and delivery of this Agreement.

Settlement of Disputes. This provision is enacted to protect all parties to this Agreement in the event of unusual changes in circumstances which occur outside the control of the parties and which create an undue and unreasonable hardship on any of the parties or gross inequities between the parties because of such an unusual change in circumstances. If any of these conditions occurs, this Agreement shall be modified by first communicating with the other party and attempting to resolve the dispute. If that does not work, the parties will submit the dispute to mediation. [Consider also including: If mediation is unsuccessful, then the parties agree to submit the dispute to binding arbitration using the rules of the American Arbitration Association.]

Statutes and Contracts Not Being Breached. Each party to this Agreement represents and warrants that the execution and delivery of this Agreement by such party, compliance with the terms and provisions of this Agreement by each party, and such parties’ consummation of the transactions as contemplated under this Agreement will not breach any statute or regulation of any governmental authority, domestic or foreign, or acceleration of any of the terms, conditions, or provisions of any agreement or instrument to which each such party is a party, or to which each such party is or may be bound, or constitute a default or event of termination thereunder.

Waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach hereof.

[*For sales of goods contracts, use the following: “No waiver by either Supplier or Distributor with respect to any breach or default or of any right or remedy and no course of dealing shall be deemed to constitute a continuing waiver of any other breach or default or of any other right or remedy, unless such waiver be expressed in writing signed by the party to be bound.]

NOTE: This blog post is NOT intended as legal advice. While having these boilerplate clauses in contracts is normally good, every situation is different. You MUST consult with an attorney before acting on the information provided in this blog or on this website. If you want help, contact us.