The importance of boilerplate provisions…and understanding your contract

Contract Law0 comments

I would venture to guess that you’ve read a contract a time or two if you are an online business owner. And chances are that the provisions toward the end of the contract, the ones that seem to be legal mumbo jumbo, you glossed over at best.

The phrase “boilerplate provisions” refers to the provisions in a contract that a business owner does not pay attention to – and often times they’re the provisions in whatever form agreement they started with. They’re the standardized clauses in a contract that business owners often agree to with little (or no) negotiation. 

Many times, a business owner’s boilerplate provisions are inconsistent, provisions are missing, or they could even be detrimental.

I am here to say that the devil is in the details! Contract interpretation or enforcement can hinge on what’s in those boilerplate provisions. And if you fail to spend any time considering boilerplate provisions, you could be hindering your chances of success if a dispute does arise with a client or customer.

This is why I’m a steadfast proponent that business owners work with an attorney to develop solid boilerplate provisions for their contracts and policies. And take the time to sit with the attorney to understand the provisions.

Before I go any further, note that this post is legal education and information, not legal, business, or financial advice and it does not create an attorney-client relationship between us. I am a licensed attorney in the State of California, but I am not your attorney unless a written Retainer Agreement exists with Nicole Cheri Oden Law. You should consult an attorney in your area to make sure you’re taking the right steps for you and your business.

boilerplate clauses

3 Boilerplate provisions to consider are:

1. Entire Agreement Provisions

I’m going to address an important concept in contracts – Parol Evidence. I know, it sounds like some sort of crime show right?! But what it really means is generally you’re not allowed to bring in other evidence to show what a contract was intended to mean. In other words, if you have a dispute about your contract with a client, they can’t use your Facebook messages to show what they think the contract was really supposed to mean. 

That being said, without an Entire Agreement Provision in your contract, they might be able to introduce those Facebook messages into evidence to explain or potentially supplement the terms of the contract. Sounds like a loophole, right?

An Entire Agreement Provision in your contract acts like a gatekeeper. It says that the contract is complete and exclusive and no other evidence can be used to show what the contract meant aside from the language of the contract itself. And the courts do give these clauses great weight. 

The question you’re probably asking is, “Why should I care?” As a business owner, we all understand that negotiation is part of all business relationships. There will probably be some back and forth in terms of price or services being offered, for example. A contract with an Entire Agreement Provision provides some certainty that everything is contained in one document that acts as the backbone for your working relationship.

2. Severability Clause 

So, let’s say you have a dispute arise with a client or customer. And they decide to challenge your contract. If the Court were to find that a provision was invalid or unenforceable, it could also find the whole contract is invalid and unenforceable.

A Severability Clause prevents this from happening by saying that the unenforceable or invalid provision be severed (or removed) from the contract and the remaining provisions remain in full force and effect. Including this type of provision can weigh heavy in the Court’s eyes to prevent your whole contract from being set aside.

In California there is a preference for severability in the Civil Code. And since contract law varies on a state by state basis, you should check in with a local small business attorney to explore your state’s view on severability and how it affects this provision in your contract.

3. Notice Provision

If your contract provides that there will be interaction between the contracting parties or there are deadlines for performance, it should also include a notice provision.

The notice provision will outline things like:

  1. the means of providing notice (personal delivery, mail, fax, etc.)
  2. the addresses for notice
  3. procedures for changing the addresses

If you work in the online space, much of your work is probably done virtually and via email. Email notices are generally enforceable under the federal Electronic Signatures in Global and National Commerce Act (E-SIGN) (15 USC §§7001–7031) and the California Uniform Electronic Transactions Act (UETA) (CC §§1633.1–1633.17) if you’re based in California. 

BUT there is always a risk that your email could end up in the spam folder or never even show up if there are server capacity issues going on. For that reason, I always recommend that if you plan to give notice by email, you also provide a hard copy of the notice by mail. Just in case.

If you are ready to understand your contract’s provisions – or need a contract drafted – for your online business, book a consultation here

This post is an attorney communication under Rule 1-400 of the Rules of Professional Conduct of the State Bar of California and Business and Professions Code Sections 6157-6159.2.

I’m Nicole.

I understand both the legal world and the online business world and can bridge the gap for entrepreneurs that want to ensure all of their ducks are in a nice, neat row. Let’s protect your business so you can build your empire.