Boilerplate Clauses – Part 2
In the last edition of our Music Law Newsletter, we began our discussion of some of the general provisions (often referred to as ‘boilerplate’ provisions) that you encounter in almost all contracts and the important roles that these types of clauses play. Specifically we discussed termination, notice, assignment and amendment provisions and what these clauses actually provide for. This time around we’ll be concluding our discussion of important boilerplate provisions by looking at governing law provisions, Force Majeure clauses and entire agreement provisions.
Underlying Mechanics
So what exactly are the ‘boilerplate’ provisions? To recap from last time, Boilerplate provisions are commonly understood to be those terms of an agreement that are not strictly related to the commercial aspects of the deal but provide for the underlying mechanics that make the agreement function. These types of clauses are usually buried towards the back of a contract. Although all of these types of clauses are not usually directly relevant to the details of the commercial deal being done in the agreement, they can still have a significant effect on your overall rights and obligations under a contract and consequently it is really important that you understand just what these clauses are providing for.
Governing Law
In any contract where one of the parties is a foreign entity or any aspect of the contract is to be performed overseas, then governing law provisions are essential. Governing law provisions clarify exactly which country’s laws are to apply to the performance of a contract. This is extremely important as for instance under American law, generally speaking, there is significantly more scope for the awarding of damages in any litigation then in comparison with New Zealand. Another issue is that key aspects of commercial law obviously differ from country to country and consequently the obligations implied into a commercial contract under American law can be significantly different to those generally implied under New Zealand law.
Disputes
Another reason for having well drafted governing law provisions in a contract is to provide as far as possible which courts any dispute will be heard in. For instance it would theoretically be possible for an American court to hear a dispute deemed to be governed by New Zealand law. In this instance although you would be assured of having the issues under dispute reviewed from the perspective of New Zealand law the fact you may have to travel to America and arrange for American lawyers to represent you could potentially be just as financially devastating as any adverse judgment. Consequently you should ensure that any governing law provisions also attempt to provide for which courts (probably best to be the courts of New Zealand) will hear the dispute.
Force Majeure Clauses
Force Majeure clauses are sometime called act of god clauses. What they provide for is that if any event occurs which is beyond the control of either party and prevents a party to the contract from performing their obligations under the contract then this will not be deemed to be a breach of the agreement. It is usual to see a list of the type of events that are deemed to qualify as ‘Force Majeure’ events. Typical examples include, natural disasters, acts of war or terrorism and changes in relevant legislation. It is also normal to see these provisions provide that if the Force Majeure event continues for a certain amount of time and one of the parties is consequently continually prevented from performing their obligations under the agreement, then either party can terminate the agreement and such termination will not be deemed to be a breach of the agreement.
Entire Agreement Clauses
The final important boilerplate provision that we’ll be discussing is what are often referred to as ‘entire agreement’ provisions. As simple as it sounds these provisions provide that the only agreement between the parties on the subject matter of the contract is that which is included in the contract. This is incredibly important as often in the negotiation and implementation of an agreement there will be much said or proposed which either of the parties may not intend is to form part of their final binding legal arrangement. What an ‘entire agreement’ clause does is just clarify that unless something is specifically provided for in the final agreement then the parties are not bound by it. So if something has been proposed in an email outside of the agreement by the other party which they later attempt to hold you to, you can have confidence if you have an ‘entire agreement’ provision that you are not going to be bound by whatever was said in this other email. On the other side of the coin however if there is something which the other party has agreed to which is not clearly provided for in the agreement, you should ensure this does subsequently get clarified in the contract or you run the risk you may not be able to rely on it.