Boilerplate Contract Provisions that May Be Harmful

Boilerplate contract provisions are those “standard” provisions that you see in almost every contract. The boilerplate contract provisions are usually found in the “fine print” that you mentally skip over because it’s boilerplate and therefore you think it cannot be changed. Some of that standard language, however, can really hurt you. Here are some of the potentially more dangerous boilerplate contract provisions:

Forum Selection Clauses: These are the boilerplate contract provisions that say that any lawsuit between you and another party to the contract must be brought in a certain state. That’s usually fine if it’s the state you are in. However, if, for example, an agreement states that you have to litigate in Minnesota (which is where one party is located) and your company is located in California, you may find yourself being sued in Minnesota, having to hire a Minnesota lawyer and generally hating life.

Liquidated Damages Clauses: These are boilerplate contract provisions that say that if a dispute arises between you and another party to the contract, that because it is difficult to measure the amount of damages, you and the other parties agree that the amount of money to be paid by the breaching party will be a certain set amount. The problem with these clauses is that the amount is usually limited to the amount of your deposit (such as in a real estate purchase agreement). Since these provisions are arbitrarily set, it’s usually better to avoid them.

Arbitration Clauses: Under these boilerplate contract provisions, you and the other parties agree that any disputes will be submitted to a private arbitrator rather than filing a lawsuit in court. Sounds good, right? However, here are the potential downsides to arbitration: (a) you may be limited to a small pool of arbitrators; (b) arbitration can take just as long, if not longer, than filing a suit in the courthouse down the road; and (c) each side has to split the cost of arbitration and the arbitrator’s fees. That’s right, you have to pay for the time of the arbitrator. This can add up to thousands of dollars.  It used to be that arbitration was the way to go for a shorter, less expensive alternative, but that is not as true any longer.

Damages Limitation Provisions: These boilerplate contract provisions limit the amount of damages that you can seek in a lawsuit. So, for example, your damages may be limited to just the cost of replacing whatever it was that was defective and nothing further. So, if the contract was for printing equipment and that equipment malfunctions, you may be able to collect payment for new or replacement printing equipment but you will not be reimburse for any lost opportunity arising out of the failed equipment, such as the failure to get a printing job completed in time.

Attorneys Fees Provisions: These boilerplate contract provisions may permit the party who wins in any lawsuit or dispute to recover their attorneys’ fees. Whether or not these provisions are harmful depends entirely on whether, frankly, you think you or any of the other parties are at risk of not performing the contract.

Of course, there are many more boilerplate contract provisions than those listed above, however those listed are some of the most common you will find.

If you are needing help with your agreement, Integrated General Counsel can help you determine your next steps.  If you are ready for a results-driven plan of action, contact us either by telephone at (925) 399-1529, schedule yourself into our calendar for an appointment at a time convenient for you, or complete the Contact Kristen form and we will get back to you.

 

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