Smart Advice About Boilerplate Clauses

When it comes to contracts, what we think of as “boilerplate” is often dismissed as legalese of little or no substance. “Boilerplate” originally referred to the smooth steel used in the construction of things like steam boilers and ship hulls. As applied to the written word, boilerplate came to refer to the parts of a newspaper, such as advertisements, that were not set in hot type, but were supplied to the printer as prefabricated (and very heavy) iron plates that could not be modified. In the legal context, the term came to mean standardized or prefabricated language that rarely varied from one contract to another. Contracting parties, and sometimes even their attorneys, pay little attention to the ramifications of what they considered boilerplate. Not infrequently, that lack of attention has unfortunate consequences.

Boilerplate Clauses in a Contract

Consider contractual language that states that “time is of the essence”. It occurs most frequently in contracts involving the purchase and sale of real estate. A typical “time of the essence” provision will look something like this: “Time is of the essence as to all terms of this agreement”. It means that the parties to the contract agree that any delay in performance, by either party, will constitute a material breach of the contract, and therefore excuse performance by the non-breaching party.

In practice, it’s not that simple. For “time of the essence” language to be effective, the agreement should make clear and unequivocal that the failure to perform by a date certain will constitute a material breach of the agreement.

“Time of the essence” language often figures in disputes over the failure to close a transaction by a specified date. If, for example, a seller of real property lets the closing date pass without putting the buyer on notice of a breach, the seller may find that he cannot enforce forfeiture of any deposits paid by the buyer because he failed to put the buyer on notice that he was in breach.

Be Thorough and Ask Questions

All parties to a contract should take care to understand the meaning and implications of every part of the agreement. If you don’t understand something, ask. As between attorneys and their clients, there should be no such thing as a stupid question.