Boilerplate Clauses: Giving Force To Your Contract

Boilerplate Clauses: Giving Force To Your Contract

Key Contact: Rachelle Sellek

Boilerplate clauses, sometimes referred to as “standard”, “general” or “miscellaneous” clauses, may seem not so essential in commercial contracts, as they are generally relegated to the bottom of commercial agreements. However, these clauses have a ‘raison d’ être’ and can provide important protection for the parties.

Boilerplate clauses tend to contain standardised wording and are routinely included in most commercial contracts, but this is not to say that a one-size-fits-all approach is appropriate. The terms of the boilerplate clauses should be carefully considered and tailored to clearly reflect the parties’ intentions within each specific commercial context. When it comes to boilerplate clauses, the key is in the detail and the outcome of many contract disputes depend on the correct drafting of these clauses.

This article is the first in a series of articles aimed at explaining the functions of boilerplate clauses and the importance of careful drafting.

Take note of the ‘Notice’ clause!

The ‘Notice’ clause typically sets out how any notice under the contract can be effectively served, and when such a notice will be deemed to have been received by the other party for the purpose of that contract. Notices are formal communications generally aimed at making the other party to an agreement aware of certain circumstances and at eliciting a response that may have otherwise been avoided or overlooked by the other party. Notices are instruments with legally binding effect on sender and recipient and merit special consideration. When drafting a ‘Notice’ clause it is important to be aware the following requirements:

Notice should be in writing and may include email.

Email is the most prominent form of communication in today’s digital world. Therefore, it is important to consider whether communication via email is sufficient or appropriate for the purpose of serving notice under a contract. If a contract stipulates that a notice shall be “in writing” but it is silent on whether “in writing” includes emails, then, whether email constitutes notice will be left open to interpretation. To avoid ambiguity, a contract should expressly state whether email is an accepted form of notice. 

Notice clause to specify address and addressee of the notice.

In Capital Land Holdings Ltd v Secretary of State for the Environment [1996] SCLR 75, it was made clear that any requirements stipulated in a contract relating to the serving of a notice must be strictly adhered to. If the contract states that notice should be sent to the parties’ registered office address, notice will not be validly served if sent to an alternative trading address of the parties.  

Furthermore, addresses and addressees for notice should be up-to-date and correct, as administrative errors could invalidate a notice or result in a valid notice not reaching the recipient, increasing the potential risk of dispute between the parties.

It is generally preferable to specify a position (within the organisation) for whose attention notices should be marked (for example, director) rather than named individuals, as details of individuals can become outdated with time. Sometimes, it may be appropriate to include a provision allowing the notice to be served on the party’s solicitor instead. However, it should be made clear in the contract that the solicitor has been properly instructed and has authority to accept such notice on behalf of a party.  

Methods for serving notice: in person, by post, DX, email, fax or telex.

The terms ‘registered post,’ ‘recorded delivery’ and ‘first class post’ are defined by statute and contracts often refer to these terms. However, to avoid scope for misunderstanding and to afford clarity, postal services may be referred to by description, and not by name.

Where delivery is by email, the parties should consider potential risks such as interception by a third party and emails arriving late or not at all. The party serving notice may mitigate some of its risks by introducing a ‘deemed delivery’ Notice clause, so that the email is deemed effective on the date it is sent (even if it does not reach the recipient’s inbox). However, where the parties are concerned with effective receipt by the addressee and time certainty the parties may prefer to exclude service by email.  If in doubt, the parties may wish to serve notice by post as well as by email.

The Notice by post. Deeming provision or recorded post?

In the absence of a deeming provision, it seems to be widely accepted in practice that a notice is served on receipt by the addressee.  In the case of Hogg v Brooks (1885) 15 Q.B.D. 256, Wilderbrook Ltd v Olowu [2005] EWCA Civ 1361 written notice was sent to the tenant at his last known address but returned to the sender without having reached the tenant. The court found that the ‘Notice’ clause in the tenancy agreement was to be interpreted as notice could only be effectively given by serving it on the tenant himself. Therefore, as notice had not been received by the tenant, it had been invalidly served. This case shows that in the absence of a deeming provision, the sender will have to be able to prove on the facts of each case that the notice had been received by the intended recipient. This could be quite difficult in some instances.

A well-drafted Notice clause can prevent argument over whether and when effective service of notice has been achieved. For example, a Notice clause may stipulate that notice must be served by registered post, and that Notice will be effectively served in accordance with proof of receipt.  If sent by non-recorded post, the parties may agree to deem a notice served on the second business day after such notice has been sent.

Conclusion

An inadequately drafted Notice clause could provide grounds for disputing the validity of a notice. Equally, failure to serve a valid notice in accordance with the Notice provisions in a commercial contract could have serious consequences for the party intending to serve such notice, even in situations when the Notice did in fact reach the other party’s attention. If notice is invalidly served, it is not effective. By way of example, if upon serving a notice of termination, a party to an agreement ceases to provide the services or stops paying for the provision of services because it mistakenly believes that a notice has been validly served, such party could be in breach of contract and liable for compensating the other party for its loss.

If you would like further information or assistance in drafting or reviewing a commercial contract, please contact our Commercial and Technology Team.

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