More Risky Business: Why Companies Need Boilerplate Clauses in Agreements
No company wants to face litigation based on contracts its employees sign. But many companies do not realize the risks of omitting even the most “legalese” language from important business agreements. “Boilerplate” clauses in agreements can be seen as the housekeeping provisions that establish how the contract will be interpreted in the future.[1] These miscellaneous statements may seem unnecessary, but using appropriate, well-drafted language can make the difference between a long-standing contract and one that is frequently challenged, whether in litigation or simply during the course of business.
For example, one common miscellaneous or boilerplate clause is the “entire agreement” clause, also known as an integration or merger clause. It states that the agreement itself is the entire agreement between the parties on the topic therein and that the agreement supersedes any previous agreements. The effect of such a clause is to help prevent someone from arguing that statements employees make to the other party to the contract, any documents besides the contract that the parties exchanged before signing the contract, or anything else besides the language of the agreement should be considered in interpreting it.[2] Perhaps most importantly, it prevents arguments that something was left out of the agreement as drafted.
Leaving out seemingly unimportant language from a business contract, such as an entire agreement clause, could have consequences down the road if a court needs to interpret it. Don’t risk it all to make the contract a little shorter.
— by Julia Damron, Esq., Barnes Law
Julia Damron is an associate attorney with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Espenschied, Lenne Eidson, Contract Drafting: Powerful Prose in Transactional Practice, 2nd ed. (American Bar Association 2015), 80-83.
[2] However, courts in some jurisdictions, notably California, have found that entire agreement clauses do not prevent a court from looking beyond the plain language of the agreement. Id. at 82.