Drafting Contracts: How Useful Is The Boilerplate?

By Hannah Rigby, Commerce & Technology Group, Lawrence Graham LLP

'Boilerplate' is the term often used to describe clauses, such as governing law and entire agreement clauses, that are so commonly found in commercial contracts that they often seem to have become standardised. Given that boilerplate clauses are so often in what looks like a standard form, how much attention do you really need to pay to them? Some recent cases have emphasised the importance of the boilerplate and other 'standard' contract provisions and phrases.

Choosing the governing law

A governing law clause lets the parties specify the system of law which will apply both to the interpretation of the contract and the resolution of any disputes that might arise from it. The Rome Convention on the Law Applicable to Contractual Obligations 1980 (Rome Convention) applies to contractual obligations in any situation involving a choice between the laws of different countries. It states that a contract will be governed by the law chosen by the parties. Such choice must be express or be able to be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. If there is no express governing law in the contract the conflict of law rules will determine which applies.

In Halpern v Halpern (2007), the Court of Appeal considered whether it is possible to apply Halakha (Jewish law) under the provisions of the Rome Convention and held that when deciding the governing law of a contract the law chosen must be that of a country. However, it went on to note that other bodies of rules (such as Halakha) can be incorporated as a term, or terms, of the contract itself. For example, the Arbitration Act 1996 states that, if the parties have so agreed, an arbitral tribunal is entitled to determine disputes in accordance with principles which are not the law of a country. In addition, matters of interpretation can be assisted by rules/laws other than the contract's applicable law, but matters affecting the contract as a whole must be dealt with by the applicable law only.

Entire agreement

The starting principle is the common law 'parol evidence rule' that outside evidence cannot be admitted to vary a written contract. However, entire agreement clauses are still used as there is an exception to the parol evidence rule if it can be shown that the written contract was not intended to capture the entire agreement between the parties. Entire agreement clauses are used to make sure this exception does not apply.

If an entire agreement clause is limited to this simple point, in other words stating that the written contract constitutes the entire agreement between the parties, the clause will not prevent one party from claiming that it has been misled into entering the contract. Therefore a non-reliance clause will often be used as this clause will typically go further than an entire agreement clause and state that not only does the contract contain the entire agreement between the parties, but also each party acknowledges that it has not relied on any representations other than those set out in the written contract and excludes liability and remedies for any...