In almost every commercial contract you would find a set of certain clauses which would look uncannily similar everywhere, but to an experienced drafter, these can make a big difference. These are called the boilerplate clauses.
Boilerplates are mostly be found towards the end of each such contract. However, they can be put anywhere within the document. As each contract is as good as the words in it, it is important to take a considerable amount of care in this regard. Boilerplate clauses demarcate and establish the rights, obligations and liabilities of the contracting parties in a more stringent manner. They are what guides the conduct and responsibilities of the parties in case of any problems arising in the future.
To customise the boilerplate clauses required by a drafter while adjusting from a format of someone else’s, the initial and most important step is to find a sample agreement that has already been drafted by someone experienced and is, in fact, in use and application.
Invest some time and look for a professional version, instead of using the first one you come across while googling. After reading through it carefully and understanding the terms that its parties have undertaken, how it might award advantages or smoothen out the contractual relationship between them, you must next undertake to identify its relevance to your particular contract and needs of your client.
Once it is pronounced as being safe, you can now move to the next step that is to checklist the number of boilerplate clauses required for your contract.
Here is a list of common boilerplate clauses and how one may customise them according to their own needs and requirements.
- Assignment Clause: This prescribes whether the contracting parties are eligible to assign their respective contractual liabilities to any third party. This clause shall depend upon the needs of the client and the speciality of service demanded of the other party.
If the service is such that only a specific person with a specific set of skills can fulfil, then assignation of the contract would be expressly prohibited from the client’s end. However, it would be in the best interest of both parties that the client is allowed to be able to assign its contracts to protect the interest of both parties. Nevertheless, what could be done to take the equation of both the parties into consideration is that assignment be allowed through a written agreement between both the parties.
- Entire Agreement: This is the clause that contains within itself the provision that the contract in question along with its annexures, schedules, attachments and others would be the only document that shall be binding upon both the parties, unless explicitly agreed upon.
This clause prevents the existence and applicability of conflicting documents and ensures that only the said contract creates a legal obligation upon the parties and no other unless specifically stated otherwise.
This clause also constraints the parties from referring to any other pieces of documentation regarding their mutual relationship, so while utilising such a clause inside your agreement, it is indispensable to keep in mind that all clauses and arrangements that the parties wish to cover have already been done so in the agreement and no further unattached document holds importance to their relationship.
- Notice: This clause enunciates the method of serving notice to the parties in situations such as breach, termination, payment procedures etc. Different parties and clients have different such arrangements, hence this clause shall be required to be tailored according to their needs and the timeline provided for the fulfilment of their respective obligations.
- Force Majeure: One of the key points to be kept in mind while drafting a force majeure clause, i.e, a clause that excuses or releases a party from fulfilling its obligation due to inescapable impossibility of performing their duties.
Such is to arise from circumstances beyond their control, such as a natural calamity or a man-made disaster and others. Force majeure forms an important part of contracts in the present tiring times, so while customising such a clause it is important to define what would be considered as a force majeure circumstance according to the terms of the particular agreement.
The scope of such a definition should not be too restrictive and narrow so as not to be able to cover all possible scenarios that might arise in future between the parties, nor should it be extraordinarily open that either of the parties could cite it to wriggle out of their responsibilities.
- Dispute Resolution: The method of dispute resolution forms an important clause in any drafting of a commercial contract. However much you think that the clause prescribing the parties to revert to arbitration is commonplace to all contracts and doesn’t require any specific customisation, you could not be more wrong.
Such clauses need to be tailored according to the requirement of the parties, explicitly specifying the venue for such arbitration, the language in which it is to be conducted, the method of choosing the representatives, whether the parties shall have an option to further litigate or the decision of the Arbitration Board is final. No matter whether you copy such a clause from any template available, these are the points that you need to customise and tailor for your clients and their requirements and take immaculate care of.
- Severability & Survival Clause: The severability clause means that each clause will be read separately so that if any clause becomes unenforceable or bad in law, then only that clause will be affected and not the entire contract.
The Survival Clause identifies the clauses which shall be applicable even in the event of termination of the agreement for any reason whatsoever and even in the situation where the contract comes to its natural end and provides for their survival at such an eventuality. The drafter must incorporate the needs of the client within such a clause so as to prevent any ambiguity in this regard.
- Governing Law & Jurisdiction: A boilerplate clause with an extraordinary level of importance is the Governing Law & Jurisdiction clause. It is highly recommended that one doesn’t copy it from a random template, because as such, this clause differs for each contract depending upon the area the contractors have based their respective business relationships in. If the contractors are of Indian citizenry and there are no cross country ramifications of the contract, then such would be governed under the jurisdiction of India, however, if the alternate were the case, the parties can opt for their preferred governing law and jurisdiction.
- No Waiver: This is a clause that further regulates the relationship between the parties. This clause clarifies the position of the parties and shows their intention as to how there would be no waiver of any rights in cases of delay or failure to exercise such rights.
- Confidentiality: A confidentiality clause is essential in cases where the parties have not bound themselves upon a separate non-disclosure agreement. In such a clause, the pieces of information, details and such other documents or communications that the parties do not want to be exploited or revealed in the public domain are to be craftily included within the clause, so as to bind the parties in such a manner that they would have no choice to respect it.
It is one of the major points in an agreement and an immense amount of care needs to be exhibited while customising such a clause to the benefit of the client. Any omission in such a clause would lead to grave consequences for the parties involved in such a transaction. Here it is also necessary to mention the time period for which such a clause shall be in force. This clause can be applied to both the parties equally or can be drafted from the perspective of a single party, it shall all depend upon the contracting parties.
- Indemnity: This is a clause that ascertains the obligations of a party when it is made liable for a breach. It is an extra layer of security that provides for the person who is affected due to the activities of the defaulting party and enumerates the exact responsibilities and liabilities of such a person to counterweigh the complications caused to the non-defaulting party. Hence the drafter needs to enquire upon the needs and requirements of the contracting parties before drafting or customizing such a clause to their benefits.
Keeping the needs of the client in mind while drafting a contract cannot be overstressed. It is a drafter’s responsibility to churn out such a document that shall protect and guide their client, and that can only be done through proper research and time and practice. Reading an article like the current could be the initial way step, however, ultimately toiling can be the only way forward to perfection.
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