February/March 2010 / Features
Don’t Get Burned By Boilerplate
The author discusses problems that can arise when so-called boilerplate contract provisions are not modified to account for changes in the law and the structure of business transactions that have occurred since the provisions were first incorporated into company contracts. The older the boilerplate, the more likely it is that its meaning has been modified or refined and the more important it is to check recent case law. It may be necessary to clarify, modify or replace the old language.
The author gives several examples of boilerplate provisions that could need attention. In Illinois, a common clause that prohibits contract amendments except by agreement in writing signed by the parties is now generally unenforceable as the result of recent case law. In New York, a statute has had a similar result. Parties may avoid claims based on alleged oral contract modifications by adding a provision stating that contract modifications can be made only by designated representatives.
Other contract provisions meriting close scrutiny include those relating to liquidated damages, arbitration, attorneys’s fees, and integration clauses.
“Make it a habit to periodically review the interpretation and enforceability of your standard provisions,” the author concludes. “A little expense incurred up front can improve your boilerplate for use in company contracts and potentially avoid problems down the road.”
