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Real Estate Law | September 2015

Don’t Get Burned by the Boilerplate

In a contract, boilerplate provisions are a critical part of the legal understanding between the parties and are not to be ignored.

One of the common and unfortunate mistakes that some individuals (and some lawyers) make is to stop reading or paying attention to the provisions of a contract generally known as “boilerplate.” It is as if this portion is some unnecessary appendage that is not a serious part of the “meat” of the contract.

In truth, boilerplate provisions are a critical part of the legal understanding between the parties and are not to be ignored. Let’s look at just two examples of what can happen when boilerplate language gets overlooked.

Example 1

Husband and Wife negotiate to buy a house. In the discussions, the seller says he will throw in the bunk beds in the kids’ room and the big-screen TV in the living room. An agreement is signed, but neither of these items is mentioned in writing. At the walk-through inspection, the buyers are surprised to find no big-screen TV and no beds. Furious, they pore over their contract and find no reference to the promised items. They do find, in the boilerplate, an “integration clause” stating that, if an agreement relating to the house is not in writing, it is not enforceable. No handshakes. No pinky swears. No beds. And no football on the big screen.

Still smarting from being lied to, our heroes send an email to the seller, saying that the deal is cancelled and demanding a refund of their earnest money. They correctly note that a provision of the contract does say they can cancel during the “inspection period,” which does not expire for two more days. They hear nothing back until three days later, when the seller directs them to the boilerplate provision detailing that “notices” must be given by hand-delivery or certified mail. They have not complied, the “notice” has not been given, and the deal is not cancelled. The buyers must either close or lose their earnest money.

Example 2

Husband (who lives with Wife in Arizona) signs a five-year commercial lease for his unincorporated business. The lease requires his signature only – i.e., not Wife’s. A lease boilerplate provision provides that the lease is subject to the laws of New Jersey (the landlord’s home state) and that New Jersey is the “forum” for all lawsuits.

The landlord fails to adequately provide basic services, the business fails, and Husband stops paying rent. The landlord threatens suit against both Husband and Wife (the marital community), rightfully stating that New Jersey law allows Husband to bind them both to the lease. Husband and Wife believe they have a good claim against the landlord for causing the business failure in the first place.

Two key questions arise:

  • Can the landlord sue both spouses on a lease that Wife did not sign, when Arizona law prohibits it, but New Jersey law is said to apply?

  • If Husband and Wife want to sue the landlord, can the landlord force them to file in New Jersey and litigate all the way across the country, after just suffering the losses from the business?

The answers are, respectively, no and yes. Husband cannot waive Wife’s community property rights, but the forum clause is enforceable.

“Only” Boilerplate

Parties sometimes consider contract boilerplate as if it is some sort of extra language, like term paper fluff added by a college student straining to reach 5,000 words.

But the examples above are real. Boilerplate is an integral part of serious contractual relationships, never to be ignored. Just as there is no such thing as a “standard” contract, there is no such thing as “only” boilerplate.