Drafting Contracts | Standard Clauses

What are Standard/Boilerplate Clauses?

Standard clauses are pre-written provisions that are commonly used in contracts. These clauses address recurring contractual issues, providing a framework for the parties' agreement. When drafting a contract, certain clauses are almost always included. These are known as standard or boilerplate clauses. These clauses are so common that you might find some of them in almost every agreement.

The clauses provided in this article can be copied and pasted into your own agreements. These clauses can also be changed or amended to the specific requirements concerning the agreement.

Standard clauses are crucial for several reasons:

• Risk management: They help to allocate risks between the parties.
• Dispute resolution: They provide mechanisms for resolving disputes.
• Legal compliance: They ensure that the contract complies with applicable laws.

Types of Standard Clauses

There are many different types of standard clauses, but some of the most common clauses include:

INTERPRETATION

• Example: “For purposes of this agreement, unless the context clearly indicates otherwise:
• The singular includes the plural and vice versa;
• Reference to the one gender shall include the other;
• The headings used in this agreement are for convenience only and should not be taken into account when interpreting this agreement.”

(This clause is usually placed at the start of the agreement and ensures that the rest of the agreement is read in context. This clause usually includes definitions for specific terms used throughout the agreement.)

ENTIRE AGREEMENT

• Example: the parties. No rights or obligations shall arise from any undertaking, warranty, or representation not contained in this agreement.”

This clause states that the written contract is the entire agreement between the parties, superseding any prior or contemporaneous oral or written communications and clearly limits the rights and obligations of the parties to the agreement. This clause is usually incorporated within the variation clause.

VARIATION

• Example:“No variation, alteration, waiver or cancellation of this agreement shall be of any force or effect unless reduced to writing and signed by both parties.”

This clause provides that the terms, rights, and obligations established by the agreement cannot change unless both parties agree to such and give physical form to such agreement. This clause does not have to specify that alterations cannot be made, but may also specify the procedure for effecting variations, or the party who may effect variations in certain circumstances which may arise.

JURISDICTION

• Example: “All parties agree to the Jurisdiction of the District Magistrate’s Court established in terms of the Magistrate’s Courts Act 1944 as amended with respects to any dispute or legal proceeding which may arise pursuant to this agreement.”

This clause specifies the Court which will have jurisdiction to hear matters where legal proceedings arose from the agreement. It is important to note that in terms of sections 45 and 46 of the Magistrate’s Courts Act, the specific geographical jurisdiction of the court cannot be consented to by way of agreement. However, the clause can provide consent to have a lower court hear matters which would normally fall outside their monetary jurisdiction. Therefore, the purpose of this clause is ultimately to lower costs should a legal dispute arise.

RELAXATION OF TERMS

• Example: “No relaxation, indulgence, or delay by either party in enforcing any of the terms of this agreement shall be deemed to be a waiver or limit any party's rights. Any such waiver must be in writing and signed by both parties to be effective.”

This clause clarifies that if one party does not immediately enforce a term of the agreement, it does not mean that they have waived their right to enforce that term in the future. It prevents parties from losing their rights simply because they allowed some leniency or delay in enforcement. The clause protects both parties by ensuring that any waiver of rights is intentional and formally documented.

CONFIDENTIALITY

• Example: “Each party agrees to keep confidential and not disclose to any third party any information relating to the business, finances, or operations of the other party which may be obtained in the course of this agreement, unless such information:

  Is or becomes public knowledge through no fault of the receiving party;

  Is required to be disclosed by law; or

  Is disclosed with the prior written consent of the other party.”

This clause ensures that sensitive information shared between the parties remains confidential and is only used for the purposes outlined in the agreement. It typically prohibits the disclosure of proprietary information, trade secrets, and other non-public information to third parties, with limited exceptions, such as legal obligations or mutual consent.

BREACH

• Example: “In the event that either party commits a material breach of this agreement and fails to remedy such breach within [number of days] days of receiving written notice from the non-breaching party, the non-breaching party may terminate the agreement or seek any other remedy available under law, including specific performance or damages.”

A breach clause sets out the consequences if one party fails to fulfill its obligations under the contract. It generally requires that the breaching party be given an opportunity to remedy the breach within a specified period. If the breach is not resolved, the non-breaching party may terminate the agreement or pursue legal remedies such as damages or specific performance.

TERMINATION

• Example: “This agreement may be terminated by either party:

  Upon written notice of [number of days];

  Immediately, in the event of a material breach by the other party that remains unremedied within the time specified in the breach notice; or

  Upon mutual written consent of both parties.”

A termination clause specifies the circumstances under which the agreement may be brought to an end. It can include provisions for termination with notice, immediate termination for breach, or termination by mutual agreement. This clause provides clarity on the steps to be followed and the rights of the parties when terminating the agreement.

SEVERABILITY

• Example: “If any provision of this agreement is found to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be severed from the agreement, and the remaining provisions shall continue in full force and effect.”

A severability clause ensures that if one part of the agreement is deemed unenforceable or invalid, it does not affect the validity or enforceability of the remaining provisions. This clause is critical for maintaining the overall integrity of the contract, allowing the rest of the agreement to remain binding even if a particular section cannot be enforced.

EXECUTION

• Example: “The parties undertake to take all necessary actions and procure all necessary documents, consents, and approvals to implement the terms and conditions of this agreement. Each party agrees to fully comply with their duties and obligations as set out herein and to cooperate in good faith to ensure the effective execution of this agreement.”

This execution clause obligates the parties to take any actions necessary to fulfill the terms of the agreement, ensuring they meet their obligations and work collaboratively to implement the agreement's provisions. It emphasizes a commitment to compliance and good faith cooperation throughout the term of the contract.

FORCE MAJEURE

• Example: “Neither party shall be liable for any failure or delay in performing its obligations under this agreement if such failure or delay is due to causes beyond its reasonable control, including but not limited to, acts of God, war, terrorism, civil unrest, strikes, lockouts, natural disasters, epidemics, pandemics, government actions, or any other event that renders performance impossible or impracticable (a 'Force Majeure Event').

  In the event of a Force Majeure Event, the affected party shall promptly notify the other party in writing, providing details of the circumstances, and shall use reasonable efforts to mitigate the effects of the Force Majeure Event.

  If the Force Majeure Event continues for a period of [insert period], either party may terminate this agreement upon written notice to the other, without liability, save for obligations accrued prior to the Force Majeure Event.”

This force majeure clause provides that neither party will be held responsible for failing to perform their contractual obligations if circumstances beyond their control occur. It requires notification and reasonable efforts to mitigate the effects, and also offers a termination option if the event lasts for an extended period.

When drafting standard clauses, it is important to:

Use clear and concise language: The language should be easy to understand.

Tailor the clauses to the specific needs of the contract: The clauses should be appropriate for the particular situation.

Seek legal advice: If you are unsure about how to draft a standard clause, it is a good idea to consult with an attorney.

Conclusion

Standard clauses are essential components of any contract. They help to allocate risks, prevent disputes, provide clarity, and ensure compliance with legal requirements. By understanding the different types of standard clauses and their purposes, you can ensure that your contracts are well-drafted and enforceable.