Learning to Read Boilerplate

In a world where contracts and agreements can be stored electronically, more and more small business owners are having to deal with written contracts in their day to day dealings. In an ideal world, people would have the time and money to let lawyers look over every contract before they signed it, but that is not always practical. In those instances, it can be helpful for business owners to learn the subjects of different types of common contract clauses so that they can better orient themselves to understand what the clause is actually doing in the agreement, since some of them are mere procedural formalities, while others can have important effects on a person’s rights.

Arbitration

One important type of clause that can appear in contracts is an arbitration clause. These clauses are agreements between the parties to settle disputes by arbitration rather than through the ordinary court system. Federal law allows people a large amount of latitude for determining how they want their arbitration proceedings to work, so arbitration clauses can have a serious impact on how the parties resolve disputes, and it may advantage one side or the other.

Choice of Law or Forum

Choice of law or forum clauses are two separate clauses that may appear under one heading. These clauses allow the parties to decide where they want disputes to be litigated and what jurisdiction’s law they want applied. Importantly, these clauses are also bound by general legal principles about where cases can be heard; two Florida companies probably cannot choose Alaska as their forum for litigation.

Counterparts

Counterparts is a largely procedural clause. It simply states that the parties can each sign their own copies of the agreement, rather than having to physically sign the same piece of paper.

Definitions

The definitions section usually appears at the beginning or end of a contract and lays out the meanings of specific words or terms that the parties want to specify. These sections can have a major impact on the meaning of a contract if they define important terms in unusual ways. People signing a contract should keep a sharp eye on the definitions section, especially if the other party is being represented by an attorney.

Merger

Merger clauses are designed to eliminate the possibility of confusion about the terms of a contract. They determine whether any previous oral or written contracts survive the signing of the new contract. Ordinarily, they eliminate all previous contracts, but they may contain important exceptions.

Representations

The representation section is a portion of the contract in which both sides certify that certain things are true. For instance, one side may certify that it is carrying an appropriate amount of insurance for whatever agreement is taking place. These are especially important to read to make sure that they are all actually true.

Termination or Survival

Termination or survival clauses may be grouped together or split up. Termination clauses deal with the proper way for a party to end the agreement, such as providing written notice within a certain time frame. Survival clauses usually explain what other clauses survive past the end of the agreement. For instance, if there is a confidentiality provision, it will likely stay in effect after the rest of the contract has finished.

Of course, even carefully written and scrutinized contracts can still lead to disputes. If you or your business is dealing with issues arising from a contract, contact a Florida business litigation attorney at Pike & Lustig, LLP today.