Boilerplate Clauses - Part 1
In previous editions of our Music Law Newsletter we’ve looked at many different types of contracts that you encounter in the music industry. However in this edition we’ll be delving a little deeper into some of the standard clauses (which are often referred to as the ‘boilerplate’ provisions) that you encounter in almost all contracts.
So what exactly are the ‘boilerplate’ provisions? 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. Common examples of boilerplate provisions include termination provisions, notice provisions and governing law provisions. 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.
Termination provisions are some of the most important ‘boilerplate’ clauses. Although there may be aspects of these provisions that relate directly to specific obligations of either party under the agreement, there are also certain standard issues that are usually covered. For instance, there will usually be provision for the agreement to terminate if either party ceases trading or goes into liquidation. The reason for this is that ideally neither party should be able to assign their rights under the agreement to another party in the event they cease to operate, as this would essentially force the other party to do business with someone they didn’t initially decide to enter into the contract with. The effect of termination provisions also need to be more carefully considered when a contract includes licenses or assignments of intellectual property (e.g., rights for a publisher or record label to exploit your songs or recordings) to ensure that, where practically possible, all or appropriate portions of such rights are reassigned and applicable licenses terminated.
Termination provisions will usually also make reference to the ability to terminate the agreement if there is a breach of any term of the agreement that is not rectified or cured within a certain period of time. You should always review these clauses very carefully to make sure there are no specific exceptions to these kinds of rights or any unusual procedural requirements that may weight the agreement in the other party’s favour. You may also wish to consider if breach of any specific provisions of the agreement by the other party should give you the right to immediately terminate the agreement without the other party having the ability to remedy such breach.
Notice provisions are an incredibly important part of the boilerplate as they set out the method and procedure the parties use to communicate with one another. You should carefully consider the way in which notices are given and make sure that you are capable of receiving and responding to notices in these ways. For instance, are you prepared to accept notices by email and fax? These kinds of issues are especially important if the other party is required to give you a certain amount of notice to cure any breach by you before they can terminate the agreement. In these situations you want to make sure you actually receive these notices, and in a timely fashion. You should also make sure that if your contact details ever change over the course of the contract that you notify the other party and update the notice provisions so you don’t miss any future notices that may be sent.
Many contracts will provide a restriction on any type of assignment of the rights and obligations of either party under the contract – after all, you don’t want the other party selling or granting their rights to another party that you may not want to be in business with or who may not be capable of meeting the obligations under the agreement. If the contract doesn’t put any restriction on assignment then you should assume that either party is free to assign as they see fit.
Another commonly seen boilerplate clause is one that deals with how amendments to the contract can be made. These clauses usually provide that any amendment to the contract must be in writing and signed by both parties. The intent behind these types of clauses is to ensure there can be no misunderstanding about the parties agreeing to alter their rights or obligations under a contract. In the course of informal conversations about the content of a contract, for example, it can be possible for one party to incorrectly assume an agreement has been reached to alter some aspect of the contract, a misapprehension it’s clearly in everyone’s interest to avoid.