There are two kinds of people in this world: those who read contract boilerplate, and those who don’t. We’ll bet we’re in the first group, and you’re in the latter.
These long blocks of text at the end of a contract can seem insignificant, especially when it seems you’ve seen it a million times. During the life of the contract, many or most of these provisions never come into play, and you may have conditioned yourself to believe this is always the case. But once triggered they can deliver quite a punch. The question becomes which party will enjoy the punching, and which party wishes they had paid more attention to all those time-intensive details at the contracting stage of the relationship.
Most experienced attorneys will probably agree that business owners who sign contracts without giving much thought to its last few pages are at a disadvantage when a dispute arises. But it’s easy to understand why boilerplate is often overlooked. A contracting party doesn’t know what he doesn’t know. He likely has little appreciation of the potential ramifications associated with a particular clause, and fails to make any inquiry. Or, he may think boilerplate is set in stone, so it’s never discussed, much less negotiated. Neither is a savvy approach.
Here’s what to consider to protect your business from boilerplate complications.
Agree with caution
Concluding a contract negotiation with an understanding of the purpose and meaning of boilerplate terms will create a more favorable landscape for you if something were to go sideways later. There are really only two ways to do this.
The first is to learn the reasons why each term of boilerplate exists, how the application of each will affect your business, and what alternatives are available or advisable. The question becomes whether a business owner has the time or inclination to delve into such an intellectual endeavor.
Most business owners rely on legal counsel to advise on the ramifications of all terms of an agreement, and suggest alternatives better suited to a particular business’s needs and risk profile. What may seem like minor revisions can realize major benefits in the event of a dispute, and can nip expensive litigation in the bud.
Understanding the fine print
When you are faced with that long block of tiny text, make sure that you know what you are agreeing to. Ask your attorney to explain the potential consequences to your business. A clause that seems minor or unlikely could end up being very costly.
Boilerplate provisions address such terms such as:
Choice of law
Choice of forum
Arbitration
Severability
Integration
Confidentiality
Fee and cost shifting
Have a basic understanding of these terms before you agree to them. While boilerplate terms may seem unimportant today, and may seem unlikely to ever cause a problem, the only time you can address these issues is during negotiations. Most terms are negotiable, but you cannot negotiate after the fact.