Boiler Plate Clauses: Understanding Their Significance and Legal Implications
Boiler plate clauses, often overlooked, are standard terms found in most agreements, covering general contractual terms rather than specific commercial ones. While most contractual terms are negotiated, boiler plate clauses are typically pre-drafted and not the subject of extensive negotiations. This leads to a tendency to copy and paste these clauses without fully considering their importance. This article delves into some common boiler plate clauses and their interpretation or enforcement by courts.
No Oral Modification Clause
This clause mandates that any modifications to the agreement must be in writing and signed by both parties. It aims to prevent informal changes and ensure contractual certainty. While Ugandan courts have limited precedent on this, it has been a contentious issue in other jurisdictions like the US, England, and Australia. Interestingly, US and Australian courts have allowed oral modifications despite the clause, whereas English courts, often cited by Ugandan courts, have taken a different stance. The UK Supreme Court ruled in Rock Advertising Ltd vs MWB Business Exchange Centers Ltd [2018] UKSC 24 that an oral modification of a contract with a 'no oral modification' clause was invalid, as it violated the parties' agreed contractual framework. However, the court acknowledged that a party might be prevented from relying on this clause if the other party had relied on oral assurances to their detriment.
Entire Agreement Clause
This clause states that the agreement constitutes the entire understanding between the parties, superseding any previous agreements. It aims to exclude extrinsic evidence, such as prior discussions, during contract interpretation. In Future Stars Investment (U) Ltd v Nasuru, the High Court of Uganda ruled that attempting to introduce oral evidence violated the 'entire agreement' clause, emphasizing that a contract without ambiguity should be applied, not interpreted. However, the court noted exceptions, allowing extrinsic evidence to clarify ambiguities or in cases of fraud, illegality, or lack of capacity.
No Waiver Clause
This clause preserves a party's rights even if they don't exercise them immediately. It hasn't been extensively litigated in Uganda, but English courts have questioned its scope. In Tele2 International Card Company SA v Post Office Limited, the court held that the Post Office couldn't rely on the 'no waiver' clause to terminate a contract nearly a year after a breach, as it had an obligation to choose whether to exercise the right to terminate. The court's decision implied that the Post Office's continued performance after the right to terminate arose constituted an election to affirm the agreement.
Severability Clause
This clause allows the remaining provisions to continue in force if a court deems a provision invalid, unenforceable, or illegal. It seeks to sever illegal provisions rather than render the entire contract unenforceable. While the Makula International Ltd case suggests that illegality overrides pleading, the severability principle is subject to certain limitations. It requires the illegal provision to be removable without modifying the remaining terms, and the contract must remain the same type as initially agreed. If substantial changes occur, the entire contract may be declared void.
Assignment Clause
Assignment involves transferring rights or proprietary interests from one party to another. Courts typically honor clauses restricting assignment, and an attempted assignment in breach of contract terms is void. Entities operating in regulated spaces should ensure that contracts incorporate standard terms prescribed by regulators.
Conclusion
Boiler plate clauses are often overlooked, but they are crucial for contractual certainty and compliance. Regularly reviewing these clauses is essential to stay updated with legal changes and decisions. Template contracts should be reviewed annually, and entities in regulated sectors should adhere to standard terms set by regulators to avoid legal pitfalls.
