Real Estate Law | September 2015
Dont 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
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
boilerplate provisions are a critical part of the legal understanding
between the parties and are not to be ignored. Lets look at just two
examples of what can happen when boilerplate language gets overlooked.
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.
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 Wifes. A lease boilerplate provision provides that
the lease is subject to the laws of New Jersey (the landlords 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:
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?
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 Wifes community property
rights, but the forum clause is enforceable.
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.