Contracts: The Importance of “Boilerplate” Clauses

In business, the word “boilerplate” is often a negative term. However, common contractual clauses, or “boilerplate” clauses, are often significant and helpful. They should not be overlooked or dismissed.

Attorneys’ Fees and Expenses

One common boilerplate clause relates to an aggrieved party’s ability to recover attorneys’ fees and expenses that they have incurred as the result of the other party’s breach of contract. Generally, U.S. courts follow the “American Rule,” which means that each party to a lawsuit will bear their own attorneys’ fees and costs, regardless of the outcome of the case. A common boilerplate clause allows for such an aggrieved party to recover the attorneys’ fees and costs that they have incurred because of the other party’s breach of contract.

Notably, the presence of such an attorneys’ fees clause can be particularly helpful even in cases of lesser value. For example, one party to a contract owes the other party $10,000 and refuses to pay. Employing an attorney to file suit to recover that $10,000 will be very expensive relative to the amount that might be recovered. In fact, if there is any complexity to the case, then hiring an attorney can quickly become prohibitively expensive – without an “attorneys’ fees” clause.

Providing Notice

Clauses relating to the methods for providing “notice” to the parties can also be helpful and significant.  They can determine to whom notice must be given, how the notice must be given, or when the notice is deemed given.

State Law Applied/State for Litigation

Often transactions or agreements will span multiple states. In such cases, helpful clauses include determining which state’s law will apply or in which state the dispute will be litigated.

Time Is of the Essence

In circumstances where the performance of an act by a certain date is important, a “time is of the essence” clause will be helpful. Often, the courts will not consider time to be a significant factor, in the absence of such a clause, to terminate a contract or award monetary damages for the failure of one party to perform within the time otherwise contemplated by the contract. Such a clause is commonly found in contracts for the sale and purchase of real estate.

Further Assurance

Another helpful clause in the sale and purchase of real estate, or a business, is a “further assurance” clause. With such a clause, the parties promise to take further acts necessary to accomplish the parties’ intent, which may not be expressly set forth in the contract. For example, in the sale and purchase of a business, or its assets, the seller may need to transfer a license, a lease, or title to an asset that was not expressly set forth in the written contract. A “further assurance” clause says that seller agrees to cooperate on such matters to achieve the parties’ overall intent.

“Boilerplate” clauses are often significant and helpful and should not be dismissed or overlooked in any transaction regardless of its dollar value, because they can enable and simplify the expense of enforcing the agreement in the event of a breach. Consult with an attorney to be sure you have the boilerplate clauses you need in your contracts.

Posted by Attorney Bryan J. Schrempf. Schrempf represents clients in a wide variety of transactions for new and existing businesses, including mergers and acquisitions, business and employment contracts, and real estate transactions, and lawsuits related to business and commercial disputes, real estate, and employment law. He also advises clients on their estate plans and represents them in probate, estate and trust administration, and fiduciary litigation.

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