A work-creation scheme for our learned friends.
Boilerplate and the cocktail napkin
I define “legal boilerplate” expansively, and that is to say “anything that didn’t make it onto the cocktail napkin”. Those terms, thrashed out over Martinis and peanuts in some ill-lit bar in a skanky part of town at three in the morning, the commandments on the stone tablet that Moses fished out of a burning bush in the Red Sea — that’s the deal, and we legal eagles have little to say about it, assuming it doesn’t actually break the law.
The remainder, be it the classic boilerplate that fills our anatomy, or the “legally vital protections for our client” — the events of default, the termination events, the close-out netting provisions, the indemnities, the security waterfalls — it is all, in this wider sense, boilerplate: it is there simply to avoid doubt.
Boilerplate within the boilerplate
There are degrees of boilerplate. Legal eagles will get het up about indemnities, default events and close out rights, and swear blind that these aren’t just boilerplate. (They are.) To be sure, they excite animal passions — at least, amongst credit officers and lawyers — in a way that representations and warranties, covenants, notices, governing law, counterparts, entire agreement, amendments, process agent appointments, Contracts (Rights of Third Parties) Act 1999 exclusions and so forth really don’t.
The buried risk of boilerplate
So, all that pointless heft down the back of the agreement that no-one, least of all the client, reads, that makes a cocktail napkin complicated — any of it can swing around and bite you when you least expect it. Especially if, as you won’t be, no-one is monitoring for compliance with the boilerplate in the first place.
If we take it that a legal provision, however standard, does something — that is to say, it alters the state of affairs between the merchants from the one that would prevail if nothing were said — and boilerplate must do: for why else say it? — and since boilerplate therefore necessarily reallocates risk away from its “natural” destination — then the question atop of a negotiator’s mind when preparing a draft ought to be, “is such a perversion of the natural order of things justified, and if so, why? How has the common law managed to get standard things so badly wrong?”
For much of the litigation over boilerplate — and there is a disheartening amount if it — boils down to a fight between one side arguing for a commonsense commercial outcome based on the essence of the cocktail napkin — that is, the understanding that passed between the merchants during their commercial discussions — and the other side, seeking to make out a freakishly distorted outcome with no equitable rationale but that is vouchsafed by creative application of boilerplate terms to which no one paid the blindest bit of attention when the contract was being negotiated.
You may call this a jaundiced view, but really, if boilerplate is designed only to reinforce the settled position of the common law, what really does it do other than adding heft?
Business at the front
Party at the back
- Representations and warranties and covenants
- Notices and communications
- Governing law and jurisdiction
- Choose your own metaphor, okay?
- In the case of the ten commandments, it is the law. We’ll just fill a couple of testaments and countless apocrypha amplifying and interpreting it, is all. So: ten commandments: the deal. The Bible, the Torah, the apocrypha and a couple of thousand years of Judeo-Christian intellectual hereitage: boilerplate. P.S. yes, I know the commandments didn’t come from a burning bush in the Red Sea.