Boilerplate Clauses That Aren’t Boilerplate: What You’re Really Agreeing To

Here is a guide to the boilerplate provisions that deserve more attention than they usually receive.

Force Majeure

A force majeure clause excuses a party from performing its obligations where performance becomes impossible or substantially impeded due to circumstances beyond its control. English law has no general doctrine of force majeure, if the contract does not include one, the doctrine does not apply.

The scope of a force majeure clause depends entirely on its drafting. Common drafting issues include:

• Whether the clause covers ‘impracticability’ as well as ‘impossibility’, the threshold matters when performance becomes commercially difficult but not technically impossible
• Whether pandemic, government action, or supply chain disruption are specifically included, general language may not be broad enough
• Whether the clause suspends obligations or terminates the contract, and under what conditions
• Whether there is a notice requirement, and what happens if it is not met

The pandemic demonstrated how significant these questions can be. Many businesses discovered that their force majeure clauses either did not apply at all or applied in ways that produced unexpected results.

Assignment and Novation

Assignment and novation clauses control whether parties can transfer their rights and obligations under the contract to third parties. Anti-assignment clauses, which restrict or prohibit transfer, are common and commercially significant:

• They affect whether you can sell or restructure your business without renegotiating key contracts
• They may prevent a counterparty from transferring the contract to an affiliate or successor without your consent
• In project finance and security arrangements, they may affect the ability to take security over receivables

Many contracts distinguish between the assignment of rights and the transfer of both rights and obligations. The drafting should be clear about which is intended and in what circumstances consent can be withheld.

Notices

In many commercial Notices clauses specify how contractual notices must be given, in writing, by post, by email, or by hand, and when they are deemed to have been received. These clauses are often ignored until a dispute arises, at which point they become critical.

A party that gives notice of termination, or exercises a contractual right, in a manner not permitted by the notices clause may find that the notice is ineffective.

Post-pandemic, many notices clauses that required physical delivery by recorded post are now outdated. Consider whether email is included and, if so, what confirmation of receipt is required.situations, the simple version of the clause will not assist a seller. Common failure scenarios include:

• The buyer has processed the goods into a finished product, an RoT clause over raw materials does not extend to the finished item without specific drafting
• The goods have been mixed with other goods and are no longer identifiable
• The buyer has resold the goods before the seller can exercise the clause, a bona fide purchaser for value without notice will typically take good title
• The clause was not incorporated into the contract, for example, because the seller’s terms were sent after the order was placed, or were never agreed

Waiver

A waiver clause typically provides that failure to enforce a right on one occasion does not constitute a waiver of that right in the future. Without such a clause, a party who repeatedly accepts late payments, for example, may lose the right to insist on strict compliance in future.

Waiver by conduct is possible, so a clear anti-waiver clause is commercially useful. However, there are limits, courts will not allow a party to use an anti-waiver clause to argue that an estoppel has not arisen where the other party has clearly and detrimentally relied on a course of conduct.

Severance

A severance clause provides that if any provision of the contract is found to be invalid or unenforceable, the remainder of the contract continues in force. Without it, the invalidity of one clause might, in theory, affect the whole agreement.

The key drafting question is how broadly the severance operates. A clause that severs the invalid provision without any ability to modify it may produce a different commercial outcome from what the parties intended. In some cases, a court may be prepared to modify an unenforceable provision to the minimum extent necessary to make it enforceable, but this is not guaranteed.

Boilerplate clauses are worth reading carefully, both when entering into contracts and before a dispute arises. The provisions that appear most generic are often the ones that determine whether a right can be exercised, whether a notice is effective, and whether one party can escape an obligation that seemed settled.

When reviewing a contract, resist the temptation to skip the ‘general provisions’ section. Read each clause and ask: what does this actually do, and what would happen if we needed to rely on it?

For a review of your standard commercial contracts or advice on a specific dispute, please contact our corporate and commercial team for practical, tailored advice.