Posted: July 30, 2021
By Shannon Fuhrer, Associate
Boilerplate clauses are everywhere: on the back of your invoice, printed in tiny font on your parking receipt, crammed into the last few pages of a long contract. Have you read any of it? No? Even seasoned professionals sometimes skip over boilerplate clauses, assuming the standard terms are not that important. Unfortunately, this can be a painful, expensive mistake if your relationship with the other party turns sour.
Types of Boilerplate Clauses & Provisions
Many types of boilerplate provisions are out there, but let us consider a few examples:
1. Entire Agreement
E.g. “This Agreement constitutes the entire agreement between the parties with respect to all of the matters contained herein and its execution has not been induced by, nor does any party rely upon or regard as material, any representations, warranties, or other covenants, whether oral or written, not contained in this Agreement.”
This clause means that the contract you are holding contains, in writing, the COMPLETE deal: Every. Single. Promise. If a dealer told you that they would put new all-season tires on the used car you want to purchase, make sure that promise is in the contract. “But you said you would do it!” will not help you much, if at all. Every aspect of your verbal agreement must make it into the written contract.
Sounds simple, right? Be careful. In some circumstances, you might have prior agreements with the other side that you want to keep in force. Unless you revise this Entire Agreement clause to reference those other important agreements, you could accidentally terminate those agreements and lose their benefits.
2. Governing Law and Attornment to Exclusive Jurisdiction
E.g. “This Agreement is governed by the laws of the Province of Alberta and the laws of Canada applicable therein and the parties hereby attorn to the exclusive jurisdiction of the Courts of the Province of Alberta.”
Did you know that contract law can vary between provinces? It certainly can between countries! Depending on the subject matter of your contract, where the contract is to be interpreted (i.e., “governing law”) and litigated (i.e., “exclusive jurisdiction”) can have a significant impact on your interests.
In this example, our clause tells the judge to use the laws of the Province of Alberta (and federal law, if it applies) when interpreting the contract. It also tells the parties that they must bring any litigation in the Alberta courts.
This clause may not seem that important, but let’s say you enter a contract with a roof shingling company to replace those old, dingy shingles on your house in Edmonton. The contractor does the work, you think they did a good job (at least, it looks good from the ground looking up!), and you pay their invoice. However, when the snow starts to melt, you discover leaks dripping from your bedroom ceiling. The roofing company refuses to take your calls or reply to your emails.
Furious, you decide to sue that company, so you bring your paperwork to your lawyer. Your lawyer reviews the contract and tells you that you cannot sue the company in Alberta. Your contract’s governing law and exclusive jurisdiction is Ontario. You now must decide if the time and expense of hiring another lawyer in Ontario to interpret the contract according to Ontario’s laws, and then travelling there for litigation, is worth it.
Spending time reviewing this clause can save a lot of headaches down the road.
3. Time is of the Essence
E.g. “Time shall be and remain of the essence of this Agreement.”
This clause means that times or deadlines stated in your contract matter—a lot. Missing a deadline could give the other party the right to cancel the agreement and walk away. If you want your deadlines to matter, make sure to include this little clause in your contract, but remember that it cuts both ways.
E.g. “Notices sent by prepaid registered mail shall be deemed to be received by the addressee on the seventh (7th) day (excluding Saturdays, Sundays, statutory holidays, and any period of postal disruption) following the mailing thereof. Any Notice personally served or sent by facsimile or email transmission shall be deemed to be received when actually served or sent provided that such service or sending is prior to 2:00 p.m. Edmonton time on a business day, failing which such Notice shall be deemed received on the following business day.”
The “notices” clause is critical to any contract dealing with time-sensitive matters. This clause states both how parties are to provide written notices to each other, and when those notices are deemed to be received (and take effect). Without this clause, you may find yourself arguing with the other party when—or if—a notice was properly sent or received. A notice delivered out of time might mean you cannot exercise an option (such as renewing your lease). You might even find yourself shut out of a transaction.
Let’s assume our example clause forms a part of a house purchase contract, and you are the purchaser. Your agreement has a “financing condition”, which means the transaction can go ahead only after you provide notice to the vendor that you have obtained financing. You have until this Thursday to provide the vendor your notice. You secure your loan on Thursday morning and send a quick email to the vendor after your late lunch celebrating the purchase of your dream home. On Friday morning, you get an email from the vendor stating that your notice is out of time, and she has ended the contract with you!
You angrily pull up your email. It was sent on Thursday at 3:32 pm! Her office closes at 5:00 pm! What is she talking about? Even though you sent your email on Thursday, your email was deemed to be received by the vendor the next business day. Your notice is out of time and the vendor has exercised her option to terminate the contract, all because of that “notices” clause.
For such an inconspicuous clause, it can have quite the punch.
E.g. “This Agreement enures to the benefit of and is binding upon the parties and their respective heirs, successors, administrators, and assigns.”
When you sign a contract, you generally expect that you and the other party are the only parties who can be bound by the contract’s terms (this concept is called “privity of contract”). Let’s imagine you have found your family’s first home. You sign the residential real estate purchase agreement, obtain financing, and conduct an inspection of the house. Satisfied, you formally remove all conditions, and you mark the closing date in your calendar. The next day, you learn that the vendor has died. Has your contract died too?
If you have an enurement clause in your contract, you’re in luck. An enurement clause identifies the individuals or entities that are required to “step into the shoes” of the absent contracting party and perform that party’s obligations under the contract. This clause provides each party some assurance that the other party—or their enured substitute—will perform its side of the contract.
In our example, you removed the conditions in your agreement, thus making the contract binding on both you and the vendor. Tragically, the vendor died before the real estate transaction itself could be completed. However, the contract itself did not die—it lived on through the enurement clause. The vendor’s executor is considered an “administrator” under the enurement clause. This means that the executor must complete the transaction on behalf of the deceased vendor (and the heirs must wait until after the transaction is concluded to receive their inheritance). The enurement clause protected your interests.
Enurement clauses, if overlooked, can create some headaches. For example, if a lease clearly states that assignments are not permitted, but the lease’s enurement clause includes “assigns”, are assignments of the lease allowed? Not allowed? Not sure? Ambiguity opens the door for litigation, so a careful review of the boilerplate clauses can save some frustration down the road.
Fun Fact: Did you know that enurement clauses are also known as “successors and assigns” clauses or “binding effect” clauses? They’re also known as “inurement clauses”—simply a different spelling of the same word, but a fun fact to bring up at your next etymology party.
Regardless of how this clause is named, it is well worth the time to ask your lawyer to review the enurement clause in your contract.
- These samples are only a few of the boilerplate clauses out there.
Boilerplate clauses can vary considerably, so you cannot not assume that the
examples given are the same as the ones in your agreement (or that they’re in
your agreement at all!).
How can we assist you?
The lawyers at Emery Jamieson LLP are very familiar with boilerplate clauses. We can help you understand them, draft them, and defend them, so reach out to us today.