Parties to a supply chain contract need to take a fresh look at “boilerplate” clauses, which can result in unintended legal consequences if not given proper attention. A discussion with two attorneys from Nixon Peabody LLP: Amy O’Keefe, partner in the Private Equity & Investment Funds Group, and Tarae Howell, associate & litigator.
Boilerplate clauses are the “fine print” at the end of a contract, often included under a heading of “miscellaneous.” They are standardized across multiple contracts, and tend to receive less attention from signatories than the unique commercial terms. Nevertheless, says O’Keefe, “They’re really important. They’re substantively operative in the eyes of the law, have meaning, and can determine outcome.” In other words, copy and paste such clause at your peril.
Among the most common boilerplates is the force majeure clause, which relieves the supplier of its obligations under the contract in circumstances beyond the party’s control. Often such events take the form of natural disasters such as hurricanes and earthquakes. More recently, force majeure has been invoked in response to disruptions caused by the COVID-19 pandemic.
Numerous pitfalls await those who rely on boilerplates without understanding their full meaning and consequences, says Howell. Something as basic as neglecting to send the other party proper notice of an intention to invoke force majeure can void the provision. “Pay attention,” Howell says. “Come up with a strategy with how to use it, and make sure you’re complying with all the obligations.”
O’Keefe recommends that the parties to a supply chain contract “dust off their boilerplate and give it a fresh look. It’s not the same world we were living in 18 months ago. Make sure you’re going to get the benefit of the contract you’re signing up for.”
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