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How do I handle boilerplate in a business contract?

On Behalf of | Apr 18, 2022 | Contracts

As you talk with another business owner about entering into an agreement to conduct a business venture, the other owner may hand you a contract with language that you have often seen in other contracts. This is likely boilerplate text that you probably do not think is worth reviewing before signing the contract. However, ignoring boilerplate may be a mistake.

Chron suggests some things you can look for in boilerplate as you review it. This gives you the chance to spot problematic areas and negotiate for better terms before finalizing the agreement.

Absence of provisions that protect you

A good business contract should spell out your rights in various situations. The problem with boilerplate is that it may not address potential situations that you fear could happen. The contract might not allow you to recoup legal fees if the other party sues you and loses. The agreement may also lack an indemnity provision that requires the other party to compensate you for losses or expenses.

Unfavorable dispute resolution methods

Contracts generally discuss how to resolve a dispute with your contracted party, but you should not take it for granted that the contract allows you to go to court. Some contracts divert the parties to arbitration, which you may not feel is in your interest. You might want to negotiate for different dispute resolution language or just to remove any obligation to seek arbitration.

Also, the contract might not establish which jurisdiction will hear your dispute. Some business contracts connect two parties from different states. Even if your contract solely deals with Oregon parties, you might prefer a specific state venue for a dispute.

Provisions that obligate you

Even a word or two could become a problem for you, particularly when the words obligate you to do something. The boilerplate might state that you “shall” perform a certain action, which could constitute a legal requirement to do so or else you will be in breach of contract. If you only want the option to carry out a provision, your contract should use the word “may” instead of “shall.”

If you feel standardized language in a contract will be to your detriment, taking the time to think it over and ask for changes may be of benefit. Getting into a legal relationship that does not suit you could be difficult to get out of and cost you a lot of money in legal fees.