This article is written by Avya Kashyap (BBA LL.B ), 5th Semester, Amity University, Patna
Abstract
Boiler plate clauses are provisions that attach in almost every contract and are equivalent to common places in particular relationships of contracts. Can often be considered routine, these clauses are essential in providing understanding, certainty and protection of law. The purpose of this article is to analyze different essential clauses that include the entire agreement clause, force majeure clause, severability clause, dispute resolution clause and confidentiality clause. Each clause appeared and analyzed in conjunction with the relevant statutory provisions of the Indian Contract Act, Evidence Act, and the Code of Civil Procedure as well as selected decisions of the court. The above clauses have a broad scope and these provisions possess a normative force and are necessary for the existence of an effective contract and so function and value can be seen in cases such as A.B.C. Laminart v. A.P. Agencies[9] and Energy Watchdog v. CERC[10]. Well drafted and functional boiler plate clauses provide for the avoidance of problems, risk limitation and preservation of the integrity of the contract. It is for these reasons that such clauses can be said to be critical to the drafting and enforcement of contracts.
Introduction
In contract law, the written specifications can be as informative as the main clauses and the provisions of a contract. Standard or boilerplate clauses are primary statements that are incorporated into a contract in order to deal with risk, identity expectations, and allocation of risk in a number of contexts. Standard clauses or boilerplate clauses are typical clauses interwoven into contracts in an effort to control for risk and establish the rights and responsibilities of the contracting parties in numerous contingencies. These clauses look rather mundane but proper drafting coupled with the right legal analysis of these provisions and documents are key to promoting enforceability as well as minimizing prospects of legal disputes that may arise out of and during the contractual relationship. It’s common to see these provisions laying down general aspects of contracts including conflicts, confidentiality, indemnification and choice of law, in case of a legal mishap or an event that the parties did not foresee.
According to the Indian legal perspective, the enforceability of the boilerplate clauses is based on the Statute such as the Indian Contract Act, the Evidence Act of 1872 and the code of Civil procedure of 1908. They are, furthermore, substantiated through judicial construction in caselaw classics. For example, in A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies[7], the Supreme Court affirmed the value of jurisdiction clauses in Energy Watchdog v. CERC[10]. In the case of the unforeseeable events, CERC explained the force majeure clause as to its sphere of operation.
In this article, the author attempts to discuss boilerplate clauses and subsequently explain their importance through related statutes and case laws. Through knowledge of such clauses, the parties can improve the contingencies for their contract, reduce the likelihood of contract uncertainty and guaranteed legal remedies in various business and personal transactions.[1]
Keywords: [2]
- Boilerplate Clauses
- Standard Contract Provisions
- Entire Agreement Clause
- Severability Clause
- Force Majeure Clause
- Governing Law and Jurisdiction Clause
- Dispute Resolution Clause
- Indian Contract Act, 1872
Boilerplate Clauses: Meanings, functions[4]
Boilerplate clauses are forms of standard provisions that have, so to say, been pre-drafted and are usually common in recurring contracts. These deal with what is called ‘general terms,’ relevant to all types of different contracts, be they specific to industry or subject matter. They serve to establish the basic legal mechanisms for the contract, such as those which deal with risk management, procedural rules, interpretation, and enforcement. The consideration of boilerplate clauses may be subsidiary to the core conditions of the contract. Nevertheless, they are quite instrumental in promoting clarity, predictability, and protection for both contracting parties.
Functions of Boilerplate Clauses[3]
- Risk Management: The other usual clauses include indemnity clauses, and force majeure; they also help to reduce the amount of risks and liabilities.
- Dispute Resolution: Jurisdiction, governing, and the clause for the settlement of disputes are perfect to give particular how portraying methods to resolve disputes and minimize litigation expenses and vagueness.
- Interpretation and Clarity: Clauses like the entire agreement clause, severability clause, and waiver clause interpret the contract in a way that no previous discussion or informal statements can affect the legal validity of the contract.
- Consistency in Operation: The standard clauses allow the contracts to stand for consistent and proper legal practices, thus providing ease to parties, lawyers, and even to courts.
Types of Boilerplate Clauses[3]-[4]
- Entire Agreement Clause: Some of them are asserting that the written document contains the full agreement of the transaction and nullifies prior agreements or discussions.
- Severability Clause: It help to safeguard that in the scenario that a particular clause in the agreement is null and void, the rest stays legally binding.
- Force Majeure Clause: Its performance may be blamed on calamities or any other unpredictable circumstance beyond its influences like hurricanes.
- Governing Law and Jurisdiction Clause: Applicable on matters of choice of law and jurisdiction in event of any fights.
- Confidentiality Clause: It limits the ability of parties in a particular dispute to share certain valuable information with the public.
- Dispute Resolution Clause: Describes the favoured techniques for the resolution of the conflict including arbitration or mediation.
Importance of Boilerplate Clauses:
Boilerplate Clause minimize the certain risks, afford legal rights, and ensure the efficiency of contract in case of controversy. Their drafting cannot only help avert possible legal problems for the involved parties, ensure proper communication or guarantee the contract’s enforceability.
Entire Agreement Clause
A whole agreement clause states that the written contract is the entire agreement between the parties and prevails over previous discussions or other informal agreements. According to Sections 91 and 92 of the Indian Evidence Act, 1872, which restrict the admissibility of extrinsic evidence to vary or contradict a written contract.
Case Law: Nandlal Thanvi v. Lakhpat Singh[5], wherein Rajasthan High Court explained that an entire agreement clause is used to exclude any prior negotiations or understandings from consideration, so as to avoid disputes, which may arise regarding verbal promises.
Severability Clause
The severability clause determines that if one part of the contract is held invalid, the remainder could be kept valid and therefore enforceable. It prevents an agreement from being declared invalid because of one voided provision. According to Section 10 of the Indian Contract Act, 1872: Says only lawful agreements are enforceable.
Case Law: Swiss Timing Ltd. v. Organizing Committee[6]: In this case the Supreme Court held that if there is a severability clause, then the invalidity of one clause does not void the contract.
Governing Law and Jurisdiction Clause
The governing law and jurisdiction-this clause describes the laws that will apply and the jurisdiction where disputes will be settled if they arise, especially relevant for cross-border contracts. In the sections 19 and 20 of the Code of Civil Procedure, 1908, empower both parties to a contract to agree upon a jurisdiction provided that it has a logical link with the case.
Case Law: A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies[7], wherein the Supreme Court has held that the jurisdiction clauses bind both the parties and, as such, the parties cannot unilaterally change their jurisdictions.
Force Majeure Clause
This is a clause releasing parties from undertaking the contract requirements when some events occur, which are not within the control of the parties, including natural calamities.
This section 56 of the Indian Contract Act, 1872, which provides for the doctrine of frustration, wherein contracts would become impossible to perform owing to a particular circumstance.
Case Law: Energy Watchdog v. CERC[10] In this case, the Supreme Court held that force majeure would apply only when there is a specific clause in the contract that would include natural calamities as well.
Confidentiality Clause
Confidentiality clauses prevent disclosure of sensitive information obtained during the contractual relationship. According of this sections 72 and 72A of the Information Technology Act, 2000, penalize unauthorized access and disclosure of confidential information.
Case Law: In the case of Tata Motors v. State of West Bengal[11], the Calcutta High Court had upheld the confidentiality obligations, especially in cases involving corporate and government-sensitive information.
Waiver Clause
There may be included a waiver clause stating that, in an instance where a provision is not enforced, it does not mean that the party has given up permanently on that right. This saves both parties from accidentally losing their rights. Not specifically dealt within the Indian Contract Act, though the general principles of waiver apply.
Case Law: Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh [12]This judgment of the Supreme Court determined that inaction doesn’t automatically mean a right is waived; explicit renunciation is necessary.
Assignment Clause
Assignment clauses deal with whether a party can or cannot assign either its rights or duties under the contract to another party. Typically, contracts will limit assignment without consent as a means of retaining control over the relationship.
Section 37 of the Indian Contract Act, 1872 states that the contracts shall be performed by the promisor or by his agent and your friend, unless otherwise stated within the contract itself. Case Law: Khivraj Motors Ltd. v. Sundaram Finance Ltd.[13], From the inception, the Supreme Court explained that assignment of rights must at all times be permitted explicitly. It ensures that an obligation can’t be transferred in the absence of a clear contractual term in this regard.
Amendment Clause
Changes to a contract typically require written consent from all parties involved. Indian law (Section 62 of the Indian Contract Act, 1872) allows contract changes if everyone agrees.
A Case Law: Union of India v. Bharat Engineering Corporation highlighted the importance of having clear rules for contract changes to make sure they are done openly.
Notices Clause
explains how formal notices should be sent, including how, when, and where. While Indian contract law doesn’t have a specific rule about notices, general principles apply.
Case Law: Bharti Tele-Ventures v. DSS Enterprises [14]showed that following notice rules is important, especially for things like ending the contract or going to arbitration.
Dispute Resolution Clause
Dispute resolution clauses outline the mechanisms of dispute resolution, such as through negotiation, mediation, arbitration or litigation. The clause saves time by avoiding litigation and instead establishes a formal framework. The Arbitration and Conciliation Act, 1996, applicable to arbitration agreements in India.
Case Law: Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.[16], wherein the Supreme Court held that arbitration clauses restrain parties from bringing an action if arbitration is agreed, and arbitration to be filed as the first step.
Indemnity Clause
Indemnity clauses safeguard one party from losses stemming from the other party’s conduct, often pertaining to claims made by third parties. Section 124 of the Indian Contract Act, 1872, delineates contracts of indemnity, rendering indemnity clauses enforceable under Indian law.
Case Law: In the case of Indian Oil Corporation v. NEPC India Ltd.[17], the Supreme Court upheld the validity and enforceability of indemnity clauses, ensuring protection against financial risk.
Counterparts Clause
A Counterparts clause is written to provide a contract which cab be signed in numerous copies or “counterparts”, each of which is regarded or original, allowing parties from different areas to sign separately.
Case Law: ICICI Bank Ltd v. M/s. Birla Cotsyn Ltd[18]. This case upheld the validity of contracts executed in counterparts and the beneficial role, thus, the court recognized in facilitating.
Survival Clause
Survival clauses simply provide that the obligations covered by the contract, for example, confidentiality or indemnity subsist after the contract has been terminated. Does not fall under any special provisions of Indian law but there may be certain aspects of continuing nuisance established.
Case Law: In Bombay Dyeing and Manufacturing Co. Ltd. v. Bombay Environmental Action Group,[19] where the Supreme Court observed this aspect of survival clauses, where contract formation involves a protracted stream of practical corporate undertakings such as environmental management obligations, which are intended to endure beyond the termination of the formation contract.
Time of the Essence Clause
In this clause, importance of time is emphasized and where time becomes a factor it suggest that it will be a breach of the agreement. This section 55 of the Indian Contract Act, 1872 provides grounds whereby time of the essence can be provided in a contract and with the agreed provisions, the consequence for failure to meet the stipulated time.
Case Law: Hind Construction Contractors vs. State of Maharashtra,[20] where the Supreme Court said that in absence of ‘time being of the essence’ the delay cannot be treated as a breach. The clause must be agreed to headed on clearly.
Relationship of the Parties Clause
This is due to the reason that in any case engaging in business or other legal activity, one does not want to be seen or deemed to be in partnership, joint venture or employment relationship with the other. Not per se prohibited under the Indian law but depends on contract interpretation.
Case Law: In Gannon Dunkerley & Co. Ltd. v. State of Rajasthan [21]the court said that in the absence of a vivid wording in relationship clause it becomes very difficult to differentiate between contractor and other relation of partnership or employment.
Conclusion
Standard form terms even though are widely considered as essentially unimportant terms play the pivotal role because they form the foundation of any good contractual terms for any condition by providing guidelines on risk management, dispute settlement, interpretation and to provide procedural formalities. By their very nature they provide certainty and uniformity which are so desirable in the protection of the interests of the parties concerned and the reduction of legal risks. Indian contract law in line with judicial decisions and statute laws underlines these clauses such as, governing law, force majeure etc., and gives then legal backing and makes contracts stronger with these clauses.
These clauses make contracts very strong and legal to enforce despite such incidences or difference arising. Because boilerplate terms define clearer conditions for areas that might normally be problematic, the terms improve the efficiency of business relations and decrease the legal disputes. By explaining what ‘boilerplate’, and how these clauses can be used and when they cannot, the contractual rights of parties can be preserved, unnecessary misunderstandings can be avoided and the very fabric of contracts are maintained secured; suggesting the extreme importance of such provisions in the contracts in question.
Reference
[1] Ipleaders, All about operative and boilerplate clauses – iPleaders ,(Last date visit 25 oct 2024)
[2] Trembly Law Firm, 8 Common Boilerplate Clauses and Why They Matter – Trembly Law Firm “8 Common Boilerplate Clauses and Why They Matter – Trembly Law Firm – Florida Business Lawyers” (last date visit 25 Oct, 2024)
[3] Aaron Hall Attorney, Boilerplate Clauses in Contracts: Legal Implications and Best Practices – Attorney Aaron Hall(last date visit 25 Oct 2024)
[4] Lawbite, What is a boilerplate clause in a contract? | LawBite
(last date visit,25 oct 2024)
[5] Nandlal Thanvi v. Lakhpat Singh, AIR 2001
[6] Swiss Timing Ltd. v. Organizing Committee, Commonwealth Games 2010, Delhi, (2014) 6 SCC 677 <https://indiankanoon.org/doc/134382998/>
[7] A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, (1989) 2 SCC 163<https://indiankanoon.org/doc/997135/>
[8] Swiss Timing Ltd. v. Organizing Committee, Commonwealth Games 2010, Delhi, (2014) 6 SCC 677 https://indiankanoon.org/doc/134382998/
[9] A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, (1989) 2 SCC 163https://indiankanoon.org/doc/997135/
[10] Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80 https://indiankanoon.org/doc/29719380/
[11] Tata Motors Ltd. v. State of West Bengal, (2008) 6 SCC 750
[12] Associated Hotels of India Ltd. v. S.B. Sardar Ranjit Singh, (1968) 2 SCR 548 https://indiankanoon.org/doc/923000/
[13] Khivraj Motors Ltd. v. Sundaram Finance Ltd., (2015) 4 SCC 209
[14]Union of India v. Bharat Engineering Corporation, AIR 1977 SC 1195 https://indiankanoon.org/doc/1599742/
[15] Bharti Tele-Ventures Ltd. v. DSS Enterprises, (2004) 1 SCC 98 https://indiankanoon.org/doc/973253/
[16] Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356 https://indiankanoon.org/doc/546691/
[17] Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736https://indiankanoon.org/doc/39679/
[18] ICICI Bank Ltd. v. M/s. Birla Cotsyn (India) Ltd., (2010) 5 SCC 334
[19] Bombay Dyeing and Manufacturing Co. Ltd. v. Bombay Environmental Action Group, (2006) 3 SCC 434 https://indiankanoon.org/doc/837072/
[20] Hind Construction Contractors v. State of Maharashtra, (1979) 2 SCC 83 https://indiankanoon.org/doc/1533730/#:~:text=The%20State%20of%20Maharashtra%20resisted,that%20the%20appellant%2Dplaintiff%20knew
[21] Gannon Dunkerley & Co. Ltd. v. State of Rajasthan, (1993) 1 SCC 564https://indiankanoon.org/doc/1332071/
[22] Indian Contract Act, 1872
[23] Indian Evidence Act, 1872
[24] The Code of Civil Procedure, 1908
