Every commercial contract has boilerplate provisions. These are the standard terms that you include in every contract. However, because these terms are standard in almost all of your contracts, they often don’t get reviewed regularly.
Do you know what is in your boilerplate provisions?
Why Boilerplate Provisions Matter
Boilerplate provisions aren’t as sexy as the parts of the contract that deals with payment and delivery. But, they are critical for protecting your company. Some standard terms in commercial contract boilerplate include language that spells out what happens when there is a breach of contract, what laws will control the litigation, and mandatory arbitration clauses.
If there is not a sound enforcement mechanism for your contract, the contract isn’t worth the paper it’s written on. Your boilerplate provides the legal framework that allows your company to contract with customers and vendors.
How Old Boilerplate Language Harms Businesses
What can go wrong with your boilerplate? A lot.
The law isn’t static. Your jurisdiction may have changed the law to make some of your boilerplate provisions unenforceable.
New case law may have changed the way courts interpret key provisions of your boilerplate. You might think your business is covered, but changes in the law could leave you vulnerable.
Business conditions and practice also continually evolve. Old boilerplate language could bind your firm to terms that no longer reflect how you do business. In extreme situations, you may find yourself bound by a choice of law provision that is unfavorable because your business has made structural or operational changes.
The language in your boilerplate is just as binding as the rest of your contract. Failing to review it regularly increases your litigation risks and makes you vulnerable to unpleasant surprises.
Conducting a Review of Your Standard Provisions
The point of using boilerplate is to streamline your contract process. You don’t want to have to review the boilerplate of every contract. However, every year as part of a regular contract audit, you should also review your boilerplate language.
Typically, businesses will have one set of boilerplate for customers and a different one for vendors. You will want to make sure the right terms are going into the proper contracts.
You will also want to make sure that the language in your boilerplate reflects the current state of the law and the current state of your business.
If any terms are outdated, they need to be replaced immediately. It is critical that your contract team stops using outdated boilerplate.
Contract management software makes it easier to create standardized contract templates and to update boilerplate.
One of the most common areas where old boilerplate terms continue to be used, even after they have been updated everywhere else, is in automatic contract renewals. Again, using contract management software will allow you to receive automated alerts before a contract auto-renews, allowing you to request a new contract with the other party before you are bound for another contract term with outdated boilerplate language.
Any time there has been a change to contract law in your jurisdiction, you should also make sure your boilerplate provisions are in compliance with the new law.
Don’t let your boilerplate language become a liability—conduct a regular review and frequently update your standardized contract language.