The term “boilerplate” is a word with has evolved over time to describe standard language in a contractual document that is often thought to have little or no legal significance. Typical boilerplate language is characterized as being in small print and located in obscure, unobtrusive areas of documents, such as the reverse side of standard forms. Indeed, the term “boilerplate” is believed to be derived from language stamped onto boilers disclaiming liability should the boiler explode. (This naturally leads one to question how the existence of the language is proved after the boiler has exploded-an issue for another day).
The law has often frowned on boilerplate language as establishing the duties of the parties to transactions. Where boilerplate type clauses alter the fundamental duties imposed by other provisions of a contract then the courts will refuse to enforce such clauses. This is especially true where unwitting consumers are involved and harsh results flow from the clauses-such as the disclaimer of liability for the exploding boiler.
However, in a commercial context boilerplate clauses appearing on commercial documents may very likely be enforced by the courts, often to the surprise of one or both of the parties to the transaction. Boilerplate type language in commercial transactions can be found in small print on the from or the back of sales quotation forms, purchase orders, acknowledgements and sales invoices. In many instances, the parties to the transaction may not even be aware of the significance, or even the existence, of such clauses. However, in the event that a dispute arises, and the parties are forced to determine their respective obligations, these boilerplate clauses can ultimately form the contract between the parties. Consequently, failure to recognize the significance of such clauses can often lead to disastrous results.
A typical sales transaction is often commenced with the so-called “battle of the forms”. The first volley in this battle usually involves the issuance of a purchase order from the buyer to the seller. The purchase order may be on a preprinted form with numerous small print provisions, all favoring the buyer. The return volley in the “battle of the forms” may be the seller’s acknowledgement of the purchase order or the seller’s invoice to the buyer following shipment of the goods. These seller-oriented forms will naturally contain provisions favoring the seller. The various provisions in the “battle of the forms” may deal with the same subjects, or they may address different subjects. The ultimate determination of which provisions on whose forms govern the transaction may depend on the manner in which each party has responded to the other’s forms. Without careful analysis and negotiation of these terms the “battle of the forms” may be lost.
For example, where the parties to the transaction are located in different states then one party may find that the “choice of law” cause in the boilerplate language requires that any legal action be taken only in the state where the other party lives and only under the laws of that state. The “home court advantage” can have an enormous effect on the outcome of the dispute. Similarly, the seller of a product may be surprised to find out that the buyer is entitled to back out of a purchase order to due a “cancellation clause” contained in the boilerplate provisions. This cancellation clause may leave the seller with little or no remedy for recovering the costs of inventory or the work in process purchased in reliance on the purchase order. Another example is the seller who has negotiated a premium price with a buyer, only to find out that because the same product was sold to another customer as a lower prices then, the premium price must be lowered as a results of a “most favored pricing” clause contained in a boilerplate language on a purchase order.
In short, parties to a commercial transaction who believe that the basic terms of the deal have been agreed upon should not discard the “boilerplate” provisions which appear on the transactional forms. These provisions should be evaluated early on and negotiated to the fullest extent possible. As one well known theologian said after reviewing his contract for personal services: “The big print giveth and the fine print taketh away.“
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