Contracts can be very confusing to someone who isn’t well versed in the law. They often seem overly long and full of irrelevant clauses. But despite how they may appear, many of these clauses are important provisions that protect you and reduce your liability. While each contract is different and should receive individualized care and attention, there are many clauses that almost all contracts have or should have. In the industry we call these “boilerplate provisions.” While such clauses may not seem applicable, they are important provisions to include in your contract. Here are some brief explanations of standard boilerplate provisions and why they are important.
Choice Of Law
These clauses specify what type of law will be used in interpreting the contract and any lawsuit over the contract. While that may not seem important and somewhat redundant, it is actually a pivotal clause. Statutes and case law vary by state, so the interpretation of an agreement in litigation can also vary depending on the law that is being used.
Forum Selection
A forum selection clause specifies where litigation will take place if needed. While we all hope no one breaches the contract and litigation never arises, it’s important to include and review these clauses to ensure any potential case will be heard in a forum you find acceptable. Florida courts have consistently upheld forum clauses unless enforcing them would be inequitable. In Manrique v. Fabbri, the court held that “forum selection clauses should be enforced in the absence of a showing that enforcement would be unreasonable or unjust.” 493 So. 2d 437, 440 (Fla. 1986).
Arbitration
Arbitration clauses are extremely common in the business world. They provide a way to resolve contract disputes outside of court, where the parties agree to let a neutral third person (the arbitrator) decide the outcome of the case. The outcome is binding, just as with a case decided in court, but it reduces the amount of time the case will take to be decided, which is often a benefit for individuals and businesses. According to Florida Statute §682.02(1) an arbitration is valid, enforceable and irrevocable unless there are grounds for the revocation of the contract, so be sure to look out for the inclusion of these.
Liquidated Damages
Many contracts include liquidated damages, which set a predetermined amount the parties agree to pay if a breach occurs. This approach avoids disputes over the amount owed and guarantees a fixed recovery in the event of a breach. It is extremely useful when the actual damages are hard to calculate. Under Florida Statute §672.718, the amount of liquidated damages must be reasonable and not a punishment, and the damages need to be difficult to estimate when the contract is signed.
Force Majeure
A force majeure clause can be paramount in a contract. Although it sounds complex and confusing, it simply excuses performance of a contract if defined events take place. For example, in Florida, the weather can prevent the performance of a contract, and a force majeure clause can excuse this nonperformance. If a hurricane or another act of God prevents construction or another service from taking place, a force majeure clause can protect you from litigation if it’s drafted properly.
Merger Clause
A merger clause, also called an “entire agreement” clause, is fairly straightforward but important to be included. This clause prevents any extrinsic terms or other documents previously signed from being included in the contract or its interpretation. This is particularly important for businesses with complex processes that have had prolonged negotiations and numerous previous documents or drafts before the signing of a finalized contract.
Severability
The severability clause preserves the remainder of a contract if a court deems certain terms are now void. For example, if the court determines that a liquidated damages clause is void, the remainder of the contract will remain in full force, instead of voiding the entire agreement.
Counterparts and Electronic Signatures Clause
In the modern world where contracts are often signed electronically, these clauses are of the utmost importance. They can be separate clauses or can be included in one clause together. Florida Statute §668.50 states that electronic signatures are enforceable, so you can continue to sign PDFs on your computer without worry. Parties may sign different copies at different times. A counterparts clause ensures the contract can be executed by signing separate copies, with each “counterpart” treated as an original. Together, these counterparts form the final executed agreement.
Conclusion
These are but a few of the many boilerplate provisions that may be included in a contract. Importantly, this is not an exhaustive list and does not include the specific provisions that a contract should include. A contract needs to be tailored to the needs of the client and to the matter at hand, with provisions that specifically pertain to what’s needed. At RAK Law Firm, we have gone through countless contract disputes and drafted many contracts. We know what possible liabilities to look for and what to include in a contract to reduce those liabilities. Contact us today to draft a contract for you or to have us review your existing contract.
For all your contract questions and needs, please contact RAK Law Firm, PLLC online or at (407) 437-0319.