So-called “boilerplate” provisions rounding out the end of contracts matter a great deal. These provisions, however, are often overlooked or dismissed as standard terms that work for each and every deal. While you may be tempted to rely on whatever the other party proposes or borrow language from a prior contract without further consideration, getting burned by boilerplate provisions even once could leave you searching for legal topical treatments that are either costly or unavailable.
Take for example the familiar choice of law (or governing law) provision. Most contracts include these provisions, and for good reason. Well drafted choice of law provisions allow parties to select the substantive law of an appropriate state to apply to their agreement. But putting aside the jurisdictional selection itself, are choice of law provisions truly one-size-fits-all?
We commonly see choice of law provisions written similar to the following: “This agreement is governed by, and construed in accordance with, the laws of the state of _, without giving effect to its conflict of laws provisions.” Looks pretty good, right?
A manufacturer using this clause for its domestic sales contracts has seemingly done well to secure familiar home court rules and laws for its commercial arrangements. But, what happens when that same form agreement is utilized for an international sale without careful reconsideration of those mundane boilerplate provisions? If you’re questioning whether the clause still holds up, you’ve got good instincts. (Or you’ve seen this movie before and could tell where the blog post is headed . . .)
This sample provision has resulted in risk for international transactions because it does not explicitly address the United Nations Convention on Contracts for the International Sale of Goods (CISG). The CISG is a decades old treaty adopted by the U.S. and a significant number of its major trading partners. Like Article 2 of the Uniform Commercial Code (UCC), the CISG applies to the sale of commercial goods only and provides certain uniform rules designed to supplement the parties’ agreement where express terms of a contract are otherwise silent. Article 2 of the UCC and the CISG contain important substantive differences. Take for example, the scenario of the “battle of the forms” that OEMs and suppliers often engage in during a contract dispute. Critically, the CISG may preempt Article 2 of the UCC for a given transaction unless it is explicitly and properly excluded. You may prefer aspects of the CISG in some situations and want it to apply to your contract, or you might not, but either way it’s important that you know the benefits and risks of that decision.
This is just one of many examples where boilerplate provisions can have a meaningful impact on your deal. Be sure to carefully consider the boilerplate provisions in your contracts.
Whether you’re tending to a recent contracting wound or looking to avoid future discomfort, Warner attorneys have extensive experience drafting, reviewing and negotiating automotive supplier contracts and look forward to the opportunity to assist you. If you have questions or concerns related to your supply chain contracts or other general commercial matters, please contact Dan Bonucchi or your Warner Automotive Industry Group attorney.