October 21st, 2020

Standard Boilerplate Provisions
Boilerplate provisions are clauses that are included in most commercial agreements. They include governing law, severability and how time-sensitive the agreement may be. Boilerplate provisions are viewed as ancillary elements of a contract and are often the least controversial and negotiated. While parties rarely give these provisions a second look, they are fundamental in interpreting the agreement, as well as the rights and obligations of each party.[1]
 
The following post aims to shed light on five common boilerplate clauses and the importance of tailoring each provision to the needs of the parties or agreement. [2]
 

1. Jurisdiction

A jurisdiction provision will determine whether there is an exclusive or non-exclusive jurisdiction where the courts will decide disputes arising under the contract. The parties attorn to a specific jurisdiction when using an exclusive jurisdiction clause. Canadian courts are known to uphold exclusive jurisdiction provisions, “unless the party challenging the clause shows ‘strong cause’ why the clause should not be enforced…”[3] A non-exclusive jurisdiction clause will include a preferred jurisdiction but does allow parties to bring an action in another jurisdiction should the circumstances deem it appropriate.
 
Choosing a jurisdiction will depend on the parties to the agreement. It is often dictated by the location of the head office or where the business operates. A governing law provision is an inadequate substitute for a jurisdiction clause and won’t dictate where disputes may be heard.[4] The specific language of the clause can have a great impact on its interpretation. In Naccarato v Brio Beverages Inc., the court found that the word “submit” does not constitute mandatory language but was considered permissive.[5] If parties negate including a jurisdiction clause, the courts may infer the appropriate jurisdiction so long as it has a real and substantial connection to the parties or agreement.[6]
 
Specifying an exclusive jurisdiction that meets the needs of the parties is important as it can avoid unexpected legal costs in another province or country.
 
2.Entire Agreement
The entire agreement clause aims to limit the obligations of each party to only what is included in the written agreement. This means that any discussions throughout negotiations or representations made prior to signing the agreement are excluded.
 
The entire agreement provision codifies “the parole evidence rule, which provides that a contract may not be contradicted by evidence of oral and written statements made by the parties before the signing of the contract.”[7] The provision is not meant to apply proactively, only retroactively, allowing the parties to amend the agreement as needed. If a proactive application is desired, the specific wording must provide for it.[8]
 
The entire agreement provision has the power to limit the obligations of the parties to what is written and included in the agreement.[9]
 
3.Notices
A notice provision is not intended to be negotiated or favour one side or the other. It will provide the outline of how the parties must communicate throughout the term of the contract. A party can provide notice for a variety of reasons, for example: renewals, assignments, amendments, or termination. The goal is to minimize the potential for disputes to ensure each party is aware of changes in the obligations of the parties.
 
The notice clause should clarify in what manner notice should be communicated (ie. fax, e-mail, mail… etc.), who should receive the notice, where it should be sent, accepted methods of delivery and when notice is deemed received and effective.[10]
 
There are two different types of notice provisions, mandatory and permissive notice provisions. Mandatory notice provisions outline the type or types of delivery the parties must comply with. Whereas permissive notice provisions allow for delivery in ways not explicitly named in the clause. If a provision is found to be permissive, courts will take a practical approach in finding whether notice is valid, and whether the method of delivery chosen provided unfair advantages to the sender.[11]
 
It is important to tailor the notice provision to the parties and the agreement to ensure ease of delivery and acceptance.
 
4.Assignment
The assignment clause will stipulate whether or not a party to the contract can transfer the rights and obligations under the contract to another party. A common provision might look like:
 
“This agreement shall not be assigned by either party without the consent of the other party.”
 
Such a provision raises a number of concerns. Namely, it doesn’t purport to identify whether the obligations, rights or both are assigned under the agreement. Further, the clause fails to specify what standard the non-assigning party must use to approve the assignment.[12]
 
Canadian courts have addressed these concerns and found that typically, unless explicitly stated, benefits under the agreement can be assigned but the obligations must receive consent from the non-assigning party.[13] 
 
The standard by which the non-assigning party must be held is the reasonability standard. The non-assigning party may only refuse the assignment of both the benefits and obligations if it would be reasonable to do so.[14] What is reasonable will depend on the specific factual circumstances, and the parties to the agreement and the potential assignee.
 
It is important to be explicit when drafting contractual provisions. The wording of the provisions should be carefully chosen and reflect the intentions of the parties.
 
5.Force Majeure
A force majeure clause aims to protect the parties to an agreement if some unforeseeable event outside the parties control prevents them from fulfilling their obligations. The clause excuses the parties from their respective obligations without causing a breach. Generally, a force majeure clause will “acts of God, war, riots, natural or other disasters.”[15] The circumstances of force majeure fall outside what is considered normal business risk.
 
Typically, the provisions will be considered narrowly with consideration to the wording of the provision. The party seeking to evoke the provisions must prove the force majeure event.[16]
 
If a contract includes a force majeure clause, the party seeking protection must take steps to prevent the event from happening, which can vary depending on the circumstances. The party is also required to attempt to avoid the event and mitigate the potential impact. It is common for a party to provide notice to the other party to an agreement to its inability to fulfill its obligations.
 
If the contract fails to provide for force majeure, the common law provides some protection under the Doctrine of Frustration. Frustration in contract law occurs when a situation arises rendering it impossible to complete the obligations under the contract. The frustrating event must not have been foreseeable at the time the contract was entered into, nor the fault of either party.[17]
 
Conclusion
Boilerplate provisions can have powerful influence over the interpretation and application of the agreement. It is important to tailor the provisions to consider the parties interests and needs and to ensure the ability to fulfill its obligations as outlined in the contract.

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[1] Boilerplate Clauses, Practical Law Standard Clauses, (2016), online : Thomson Reuters <https://blog.richmond.edu/lawe759/files/2016/08/Boilerplate-Clauses.doc.pdf>.
[2] Ibid.
[3] Mary Paterson, Simon Hodgett & Seth Whitmore, How to draft exclusive vs. non-exclusive jurisdiction clauses, (May, 2019) online: Osler <https://www.osler.com/en/resources/regulations/2019/how-to-draft-exclusive-vs-non-exclusive-jurisdiction-clauses>.
[4] Christmas v Fort McKay First Nation, 2014 ONSC 373.
[5] Naccarato v. Brio Beverages Inc., [1998] AJ No 47 (QB).
[6] Club Resorts Ltd. v. Van Breda, 2012 SCC 17.
[7] Soboczynski v. Beauchamp, 2015 ONCA 282 at para 46.
[8] Shelanu Inc. vs. Print Three Franchising Corp. (2003) , 64 O.R. (3d) 533 (C.A.) at paras 51 and 52.
[9] Supra note 7.                                                                                                                        
[10] J Gerard Legagneur, Why your contract’s “notices” provision is vitally important, online: < https://www.nolo.com/legal-encyclopedia/why-your-contract-s-notices-provision-is-vitally-important.html>
[11] Ross v T Eaton Co., (1992) 96 DLR (4th) 631 (Ont CA).
[12] TL Stark, Negotiating and Drafting Contract Boilerplate, (New York: AML Publishing, 2003) at page 37.
[13] Rodaro v Royal Bank, (2002), 59 OR (3d) 74 CA.
[14] McCallum, Hill & Co. v Imperial Bank, (1914), 7 Sask LR 33 (SC).
[15] Peter Wiazowski & Trevor Zeyl, Contract performance in a coronavirus world: Force majeure clauses and the doctrine of frustration, (March 2020), online: Norton Rose Fulbright LLP < https://www.nortonrosefulbright.com/en-ca/knowledge/publications/844d7cf4/contract-performance-in-a-coronavirus-world-force-majeure-clauses-and-the-doctrine-of-frustration>.
[16] Ibid.
[17] ES Block, K Brabander, M Lam, MS Bridges & K Smyth, The impact of Covid-19 on contractual obligations: force majeure and frustration, (March 2020), online: McCarthy’s LLP < https://www.mccarthy.ca/en/insights/articles/impact-covid-19-contractual-obligations-force-majeure-and-frustration>.