BoilerplateMarch 26, 2017
In the 19th century, advertisers sometimes supplied copy to newspapers in curved steel plates, ready to be placed in the rotary printers of that day. This prepared text became known as “boilerplate”, after curved plates used to make boilers, and the term applies today to standard language in contracts.
Many clients belittle boilerplate, but if contracts are part of your business you’d better pay attention to the fine print.
Let’s say you have a boatyard with lots of out of state customers. You’ve got a written contract – that’s a great start – and it contains at least the hourly rate or the fixed price, a description of the work to be done, and an estimated completion date. If you’ve got nothing else, you’ve also got that all-important clause stating that if you have to enforce your rights to payment, the customer has to pay your collection costs, including attorney’s fees.
And maybe that’s where the contract ends. Here are some potential issues where boilerplate terms could save your bacon.
Suppose you rebuild a wealthy Californian’s yacht. You and he get into a dispute over the work or the cost, and he sues you for breach of contract – in Los Angeles. Assuming you had sufficient contacts with California (advertising, boat shows, letters, emails, other customers), it’s a safe bet that the L.A. court would assume jurisdiction over the case, and you’d have to hire a west coast lawyer at big cost. Even if you thought your contacts with California were so modest as to make it unfair for you to be sued there, you’d have to hire a lawyer to make that case, and those “forum” motions are fact intensive and expensive to litigate just by themselves. The worst move would be to simply let the California court enter a default judgment against you (that is, a judgment against you because you never answered the complaint). Your customer could then enter the judgment in Maine and it would promptly become a Maine judgment, with no real ability on your part to object.
The solution is a choice of forum clause. It is perfectly proper to state in your contract that any legal action stemming from the contract must be brought in Maine, and you can see how critical such a clause can be.
A close relative to forum is choice of law. While we’re making clear that any legal action must be brought in Maine, let’s also add “with Maine law to apply”. While that may be obvious to everyone, inclusion of a choice of law clause in your contract could prevent the big shot’s lawyer from filing an expensive motion arguing that the law of some other jurisdiction ought to apply.
“No cash no splash.” Under the law of maritime liens this clause may or may not be necessary for a boatyard to keep a boat until the bill is paid, at least briefly and until the yard files in court seeking an arrest. But stating in the contract that the yard shall hold the yacht until full payment is received may enable you to hold the boat for months – or longer – pending payment, without going to court.
Lots of yachts and fishing boats are owned by a corporation or an LLC (limited liability company). Suppose you send out a contract to your customer John Doe for signature and it comes back signed “John Doe, managing member Yacht LLC”. Unless your contract has the correct language, that signature means you can’t go after John Doe personally for any breach of contract. So now you need Doe to execute a separate guaranty, something he may be reluctant to do.
My solution is to include a guaranty in the boilerplate, as follows: “If you are executing this contract on behalf of a corporation, limited liability company or other limited liability entity, you are personally guaranteeing the entity’s performance”. There is other important language as well – consult a lawyer about all this stuff – but you get the idea. I actually recommend using this technique in most every standard consumer type contract, especially for services.
Suppose you have a nicely prepared written contract, all signed and everything, and a dispute later arises over, say, your $60.00 labor rate for painting. “You told me on the phone that you’d charge me $40.00 an hour for painting!”, the customer objects. You have no such recollection. Now there is an area of disagreement the written contract does not address. That could lead to litigation.
The solution is an integration clause, which basically says “This written contract is the entire agreement, and supersedes any oral or written discussion.” But be careful: an integration clause can cut both ways. If you really intend the written contract to be the whole agreement, you had better (a) be careful not to yourself rely on any emailed or spoken agreements and (b) use written, signed change orders for any variation to the contract.
Other boilerplate terms are out there – waiver of jury trial, arbitration clauses, defense and indemnification for third party claims, waivers of insurance subrogation, and many others. Some of these could be really important to your business. Consult a lawyer.
And stay out of trouble.
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