10 “Boilerplate” Terms that Can Play a Critical Role in Commercial Litigation

Essentially all commercial contracts contain a series of “boilerplate” terms that address various aspects of the parties’ commercial relationship. These terms also typically address what happens if things go wrong. As a result, they can play a key role in the event of a dispute, and this makes it critical for both parties to have a clear understanding of what they say, what they don’t say, and when they do (and don’t) apply. Learn more from an experienced Miami commercial litigation attorney at Gonzalez Law Offices, P.A.

Common Boilerplate Terms in Commercial Contracts that Can Impact Commercial Litigation

Several standard boilerplate terms can play a key role in commercial litigation. Here are 10 examples:

1. Indemnification

Indemnification clauses shift liability between contracting parties for third-party claims. If one party agrees to “indemnify” the other for a particular type of third-party claim, this means that it will assume liability in the event that a covered third-party claim arises. As a result, indemnification clauses can have a substantial impact on both parties’ potential liability exposure; and, for this reason, they are often the central focus—at least initially—of disputes involving third-party claims.

Many commercial contracts also include “hold harmless” clauses, and often, one party agrees to “indemnify and hold harmless” the other with respect to certain types of claims. While an indemnification clause provides the indemnified party with the right to shift liability, a “hold harmless” clause provides this same party with protection in the event that the other party seeks to shift liability inappropriately.

2. Insurance

Many commercial contracts include mandatory insurance provisions. These provisions are intended to ensure that adequate coverage will be available in the event that one party needs to pursue a claim against the other. However, a key question in many cases will be whether one party’s “mandatory” insurance coverage applies—and, if a party’s insurer denies coverage in connection with a dispute, this can add to the costs of the dispute resolution process for all parties involved.

3. Limitation of Liability

Limitations of liability are common boilerplate clauses that mitigate one or both parties’ risk exposure in relation to disputes arising during the term of their agreement. Limitation-of-liability clauses can take a variety of different forms, with one fairly common example being an agreement that neither party will be liable for indirect or consequential damages.

Damages caps are a common form of limitation-of-liability clause as well. As its name suggests, a damages cap places an upper limit on a party’s potential liability exposure. This upper limit can be any figure to which the parties are willing to agree. One common example in the vendor-customer scenario is an agreement that the vendor will not be liable for damages in excess of its revenue generated from the parties’ relationship.

4. Liquidated Damages

A liquidated damages clause specifies the damages a party is entitled to receive in the event of a breach by the other party. Liquidated damages clauses avoid the need to prove damages at trial, and, depending on the amount specified, a liquidated damages clause can potentially be advantageous to either or both parties. While liquidated damages clauses are particularly common in contractual relationships where proving the financial costs of a breach would prove difficult, commercial parties can—and do—use liquidated damages clauses in other scenarios as well.

5. Alternative Dispute Resolution (ADR)

Commercial contracts frequently include alternative dispute resolution (ADR) clauses that require the parties to pursue mediation or arbitration (or both)—either as a precursor to or in lieu of going to court. In the commercial context, ADR can be a cost-effective alternative to litigation in many cases, and both parties will often (though not always) prefer to go to mediation or arbitration rather than litigate.

Mandatory ADR clauses often include carve-outs for situations where one of the parties needs to seek injunctive relief on an emergency basis. This is critical for both parties to keep in mind, as they will need to consider whether to comply with (or seek enforcement of) their contract’s mandatory ADR clause in relevant cases.

6. Choice of Jurisdiction

Choice of jurisdiction clauses specify where the parties must mediate, arbitrate, or litigate. While commercial parties may agree to a neutral location for dispute resolution in some cases, it is not uncommon for the party with superior bargaining power to require all dispute resolution proceedings to take place in the city where its headquarters are located.

7. Choice of Law

Choice of law clauses specify which state’s laws will govern the parties’ performance obligations and the enforcement thereof. While the choice of jurisdiction and the choice of law clauses will often align, there are circumstances in which one or both parties may prefer that a different state’s laws apply. This could be the case, for example, if one state has provided particularly clear (and favorable) guidance on issues that are pertinent to the parties’ agreement.

8. Integration

An integration clause clarifies that the parties’ written contract encompasses their entire agreement. In other words, it makes clear that neither party is relying on representations or other statements made outside of the contract. Integration clauses can play a key role in disputes involving fraudulent inducement claims and other similar types of extra-contractual claims.

9. Amendment

An amendment clause typically makes clear that the parties’ contract can only be amended by a written document signed by both parties. Similar to an integration clause, the purpose of an amendment clause is to ensure that the parties are relying solely on the written terms to which they have agreed.

10. Force Majeure

Finally, force majeure claims can play a key role in certain types of commercial contract disputes as well. These clauses excuse one or both parties’ performance obligations in the event of circumstances beyond their control. Examining the specific language of a force majeure clause will be critical for assessing the parties’ respective rights, and, as these clauses are often drafted broadly, it won’t always be clear whether (and to what extent) a party’s performance should be excused.

Schedule a Call with a Miami Commercial Litigation Attorney at Gonzalez Law Offices, P.A.

If your company is facing a contract dispute in South Florida, we invite you to contact us for more information. To schedule a call with a Miami commercial litigation attorney at Gonzalez Law Offices, P.A., please call 305-676-6677 or inquire online today.