Using precise contractual language is important—especially when it comes to insurance agreements. By using straightforward language, you can avoid:
- Legal disputes
- Misinterpretation, and
- Costly mistakes
Today, we’re going to discuss an important piece of contractual language: boilerplate clauses. Here’s your guide to boilerplate clauses.
what is a boilerplate clause?
Boilerplate clauses, sometimes called standard, miscellaneous, or general clauses, are found at the end of most legal documents. Since these elements are lumped together at the bottom, it’s common for boilerplate language to be overlooked.
However, boilerplate clauses can serve an important purpose in any contract.
Boilerplate provisions can address a range of things but are most commonly known as the saving grace if a dispute ever arises between the two contracted parties.
Boilerplate language defines the relationship between the parties and can help determine “what happens if a document is declared unenforceable, how disputes will be resolved, which laws govern the contract, and more.”
what contracts commonly include boilerplate clauses?
Boilerplate clauses are often found in standard form contracts, such as those used by online retailers or service providers. While these clauses may not be negotiated, they can still have a significant impact on the rights and obligations of the parties to a contract. Therefore, it is important to understand what each boilerplate clause means and how it may affect you before entering into a contract.
Common examples of contracts that would contain a boilerplate clause include:
- real estate leases
- vehicle purchase agreements
- employment contracts
The boilerplate clause typically appears at the end of the contract and includes language that is standard across all similar types of contracts. This clause may cover things such as arbitration, choice of law, and jurisdiction in the event of a dispute.
boilerplate clause examples
To provide some examples, below we will detail common boilerplate language that can be found in a contract.
A severability clause “keeps the remaining portions of the contract in force should a court declare one or more of its provisions unconstitutional, void, or unenforceable.”
These clauses typically require one party to indemnify (or reimburse) the other party for any losses that they may suffer as a result of a breach of the contract.
Indemnification clauses are designed to protect one party from liability in the event that the other party causes damage or injury.
For example, if Company A agrees to indemnify Company B for any losses suffered as a result of Company A’s negligence, then Company A will be responsible for reimbursing Company B for any damages incurred.
limitation of liability clause
This clause limits the amount of money that one party can be held liable for if the other party suffers damages as a result of a breach of the contract.
Limitation of liability clauses are intended to limit the amount of damages that one party can recover from the other in the event of a dispute.
For example, if Company A and Company B agree that Company B’s liability will be limited to $100,000 in the event of a dispute, then Company B will only be responsible for paying up to $100,000 in damages, regardless of the actual amount of damages incurred.
A jurisdiction clause determines in which state or county the contracted parties have the right to settle legal disputes.
governing law clause
A governing law clause is “a clause used in legal agreements where you can declare which rules and laws will govern the agreement if legal issues arise.”
Governing law and jurisdiction clauses establish which laws will govern a contract, and which court will have jurisdiction over any disputes that may arise under the contract.
For example, if Company A and Company B agree that their contract will be governed by the laws of the state of California, then any disputes that arise under the contract will be resolved in a court located in California.
dispute resolution clause
Identifies how a dispute between the two parties will be handled if one arises. For example, through negotiation or mediation before court action.
prevailing party clause
A prevailing party clause states that in the case of a legal dispute, the losing party will pay the legal fees for the winning party.
force majeure clause
These clauses excuse a party from performing its obligations under the contract if they are unable to do so as a result of circumstances beyond their control, such as war, natural disasters, or economic downturns.
Of course, there are many other clauses that fall under boilerplate language. This is why it’s important to consult a professional about the contractual language used in your insurance agreements—so no stone goes unturned.
who should know about boilerplate clauses?
The answer is everyone who writes or reviews contracts! A boilerplate clause is a standard term or phrase that is included in many contracts. These clauses typically address risk allocation, indemnification, governing law and jurisdiction, and other important topics. While boilerplate clauses may not be the most exciting part of a contract, they are essential to understanding your rights and obligations under the agreement.
If you are entering into a contract, it is important to review all of the boilerplate clauses carefully. If you have any questions about what a particular clause means, you should ask an expert for clarification. Even if you don’t understand all of the legal jargon in a boilerplate clause, it is still important to be aware of its general purpose and how it could affect you.
here are some tips for understanding boilerplate clauses:
- Read the entire contract. Don’t just skip to the end. The boilerplate clauses are just as important as the rest of the contract.
- Pay attention to the language used in the boilerplate clauses. These clauses are often written in legalese, which can be difficult to understand. If you’re not sure what a word or phrase means, look it up.
- Consider how the boilerplate clauses will affect you. For example, if there’s a clause that limits your liability, think about whether that’s something you’re comfortable with.
- Don’t be afraid to ask questions. If you’re not sure about something, ask the other party or a lawyer. It’s better to get clarification than to sign a contract that you don’t fully understand.
the importance of routine insurance audits
As we’ve mentioned, the wording used in an insurance contract is very important. Legal wording can guide the obligations of each party as well as how these specific obligations are interpreted.
For this reason, at benchmark commercial insurance, we recommend that you take a hard look at contractual language—preferably, with a professional at your side.
It is important to not only look at a contract as it’s being created, but also to conduct routine insurance audits. This way, you can review and adjust your policy as needed.
Interested in learning more? Read on to find out how to stabilize or reduce your insurance costs.
While boilerplate clauses may not be the most exciting part of a contract, they are essential to understanding your rights and obligations under the agreement. So make sure to review them carefully before signing on the dotted line!