Boilerplate clauses in English law governed contracts: common pitfalls and how to avoid them

"Boilerplate" refers to the so-called standard provisions typically found towards the end of commercial contracts which establish a framework governing how the contract operates, how it may be modified, who may enforce it, and what happens if disputes arise. 

Despite their standardised appearance, boilerplate clauses are not just a mere formality and in this three part series we explore key boilerplate clauses, their common pitfalls and how to develop best practices to avoid them.

1. Entire Agreement 

The entire agreement clause serves to define the scope of the contractual relationship, confirming that the written contract contains all terms agreed between the parties and superseding prior negotiations, representations, and understandings. It aims to provide certainty and prevent parties from relying on pre-contractual statements or side agreements.

Common pitfalls

• Failing to exclude implied terms: Standard entire agreement wording may not exclude terms implied by statute, custom, or fact. Express language is needed if the intention is to exclude such terms, though statutory rights (particularly consumer rights) cannot generally be excluded.
• Inadequate exclusion of pre-contractual representations: A basic entire agreement clause will not, by itself, exclude liability for misrepresentation. Case law confirms that parties seeking to exclude or limit liability for pre-contractual misrepresentations must include express language to that effect.
• Inconsistency with acknowledgment clauses: Entire agreement clauses can conflict with warranties that a party has relied on certain information or has conducted its own due diligence. 

… and how to avoid them

• Draft entire agreement clauses to expressly address pre-contractual representations and exclude or limit liability for misrepresentation (subject to reasonableness).
• Consider whether exclusion of implied terms is intended and achievable within the contractual context.
• Ensure consistency between the entire agreement clause and any reliance or non-reliance acknowledgments elsewhere in the contract.

2. Amendments and Variations 

Amendment clauses specify the formalities required to vary the contract, typically requiring variations to be in writing and signed by authorised representatives. These "no oral modification" (‘NOM’) clauses aim to prevent informal or disputed variations and provide evidential certainty.

Common pitfalls

• Rock Advertising: The Supreme Court's decision in Rock Advertising Ltd v MWB Business Exchange Centres Ltd confirmed that NOM clauses are generally enforceable as a matter of English law.
• Inadequate specification of authorisation: Clauses that require variations to be "signed by the parties" without specifying authorised signatories or levels of authority can lead to disputes about whether a purported variation is valid.
• Failure to address electronic variations: Traditional wording requiring "written and signed" variations may not adequately address email exchanges, electronic signatures, or modern communication methods.

… and how to avoid them

• Include clear NOM clauses specifying that variations must be in writing and signed by authorised representatives.
• If email exchanges and/or electronic signatures will suffice to amend the contract, ensure that the variation clause expressly addresses this.
• Maintain clear internal processes to ensure only authorised persons agree variations.

3. Assignment and Novation

Assignment and novation clauses control whether and how parties may transfer their contractual rights and obligations. Assignments transfers rights (but not obligations), whilst novations create a new contract with a substitute party. These clauses protect parties from finding themselves in contractual relationships with unknown or unsuitable counterparties.

Common pitfalls

• Ambiguous restriction scope: Clauses prohibiting assignment "without consent" without specifying the nature of the consent right create uncertainty.
• Failing to address declarations of trust or sub-contracting: Assignment restrictions may not prevent a party from holding its contractual rights on trust for a third party or sub-contracting performance (unless obligations are personal in nature or express prohibitions exist).
• Inadequate change of control provisions: Assignment restrictions do not prevent indirect transfers through corporate acquisitions or reorganisations unless the contract includes express change of control provisions.

… and how to avoid them

• Specify clearly whether assignment requires consent and whether consent may be withheld in the counterparty’s absolute discretion or only on reasonable grounds.
• Consider whether restrictions should extend to declarations of trust, charges, or other dealings with contractual rights.
• Include change of control provisions if the identity and financial standing of the counterparty is commercially important.
• Distinguish between assignment of rights and delegation of performance obligations.

Come back next week for part two, where I will explain another 3 common pitfalls and how to avoid them. If you have any queries regarding this topic, please don’t hesitate to contact me at hannah.moran-ellis@twobirds.com.