structure of typical agreement (incl. boilerplate) Flashcards
structure of a commercial agreement
- FRONT COVER
- CONTENTS
- commencement, date, parties
- recital (desirable only)
- definitions and interpretation
- OPERATIVE PROVISIONS
- boilerplate clauses
- schedules
- testimonium and execution
OPERATIVE PROVISIONS
- terms defining the scope of agreement
- conditions precedent
- obligations of parties
- options or rights in favour of one party
- warranties and indemnities
FRONT COVER
- DESCRIPTION of the document indicating the transaction to which it relates
- DATE (modern form of dating 22 June 2017)
- names of the parties (if three or more parties, numbers used in brackets after name of the party)
- firm’s name and address (foot of front sheet)
contents page
each clause described by its heading in order it appears
- clause number
- page number
NOT an index listing subjects in alphabetical order
COMMENCEMENT DATE AND PARTIES
- DESCRIPTION (e.g. “This Partnership Agreement”, or “This Deed of Conveyance”))
- date, left blank till day last party signs it (modern form)
- full name and address (incl. postcode) and reg. number (NOT BUSINESS NAME, PUT REGISTERED NAME)
Recitals
introduced by “WHEREAS” or “BACKGROUND”
- not operative provisions
- but referred to by court if operative provisions are found to be ambiguous
- brief background/history of agreement
DEFINITIONS
first clause after COMMENCEMENT, DATE, AND PARTIES and RECITALS
defined so:
- particular concept can be covered by one or two words
- word can be given wider/narrower meaning than normal
NO OPERATIVE PROVISIONS IN DEFINITIONS
HEADINGS AND INTERPRETATION
This clause is often included in definitions
- determines interpretation of the document
states:
- headings in agreement are for convenience
- do not affect construction of agreement
- singular will include plural and vice versa unless context requires otherwise
- any gender includes any other gender
conditions precedent - what are they
must be met before agreement can come into force
E.g. novation of key contract, obtaining government license, receipt of important tax clearance
COMPLETION ONLY TAKES PLACE ONCE CONDITIONS PRECEDENT FULFILLED
conditions precedent - how to draft them
- IDENTIFY CONDITION CLEARLY (no scope for doubt as to whether satisfied)
- IDENTIFY WHICH OBLIGATIONS ARE CONDITIONAL (likely some provisions come into force even if condition not satisfied - e.g. confidentiality + interpretation clauses like definitions and governing law)
- WHAT NEEDS TO BE DONE TO FULFIL CONDITION - is this IN THE PARTIES CONTROL? (if partly in control of 3P and partly one party, consider if best to put that party under duty to use ‘reasonable’ or ‘best’ endeavours to ensure fulfilment
- INCLUDE LONG STOP DATE WHEN CONDITION MUST BE FULFILLED (and what happens if not - termination and sue for damages?
warranties and indemnities
way in which risks involved in commercial contracts are allocated and liability of parties defined
- define legal duties
- supplement/clarify any implied terms
Ability to limit/exclude liability under contract may be governed by statute (e.g. UCTA 1977, Misrep Act 1967)
warranty
binding statement of fact made by 1 party to the other
- used where 1 party enters agreement on basis of certain assumptions about the other
- used to define party’s obligations (e.g. if X has to deliver goods, X gives warranties as to quality)
indemnities
contractual obligation where 1 party agrees to keep another protected from a specific loss
- liability under an indemnity arises because parties stipulate 1 shall save another from loss (NOT because of breach)
- general principles of liability do not apply with indemnities (e.g. remoteness, mitigation)
terms defining scope
set out scope of party’s obligations set out elsewhere in obligation
e.g. term clause - defines duration of obligations under agreement
boilerplate clauses
general routine clauses
- deal with how contract operates
- regulates, controls, modifies obligations of all the parties
- careful thought of use of boilerplate in particular circumstance
entire agreement clause - what is in it
- States contract is the entire and only agreement
- Says that each party has not relied on and will have no remedy re: any statement, rep, warranty, or undertaking, other than what is expressly set out in agreement
- only remedy is breach of contract under terms of agreement
- nothing in clause limits/excludes liability for fraud
entire agreement clause - purpose
prevent party relying upon it from being liable for any statements/representations except as expressly set out in the contract
- commercial certainty (all obligations recorded in identifiable set of contractual documents)
- allows parties to accurately access risk (excluding oral assurances)
- allows parties to calculate a fair price more accurately
- prevents 1 party arguing that other terms of contract are elsewhere
governing law and jurisdiction clause - what is in it
includes:
ONE - law applicable
TWO - jurisdiction where disputes should be heard
THREE - whether courts’ jurisdiction is exclusive or non-exclusive
FOUR - covers “any claim, dispute, or difference arising out of or in connection with this Agreement”
(doesn’t have to be the same country)
good even if no international element
notice clauses - what is it
provides for
- where notice is to be served
- method of service
- time when notice is deemed served
- usually req. to be in writing
force majuere clauses
this suspends or terminates contractual obligations if event occurs outside parties’ control that prevents one party performing its obligations
specifies:
- which specified events
- specified period suspended for
- clause that states if event is continuing at the end of that period, contract will be considered to be terminated
e.g. acts of god, adverse weather, floods, snow, war, riot, government action
assignment and non-assignment clauses
states:
- neither party shall be entitled to assign this Agreement or sub-contract any part of this Agreement to any person, persons, or company without the prior written consent fo the other party
- total prohibition/named persons is too strict
- otherwise, contracts can be freely assigned (but burden cannot be - to transfer burden, must use novation)
- courts interpret NAC strictly
exclusion of 3P rights clause
- for purpose of Contracts (Rights of Third Parties) Act 1999…
- this Agreement does not and is not intended to give any rights, or any right to enforce any of its provisions, to any person who is not a party to it
exclusion of 3P rights clause - why?
C(ROTP)A 1999 - changed common law doctrine of privity of contract; person not a party to contract may gain statutory right to enforce a term if:
- contract expressly provides he may
- term purports a benefit on him
extent of act unclear so protect client’s position using this clause
severance clause - what is in it
- if any provision is found invalid or unenforceable, this won’t affect the other provisions
- if provision is found invalid or enforceable, but is valid/enforceable if some part of the provision was deleted, provision shall apply with modification as necessary
- parties agree to attempt to substitute invalid/unenforceable provision with a valid/enforceable provision achieving to greatest extent possible the same effect as would be achieved by original provision
severance clause - why?
if any clause is declared illegal, unenforceable or invalid (whole or part), it can BE SEVERED from the contract at the discretion of the court
- remaining contract or part of that provision will remain valid and enforceable
- court generally won’t interfere with invalid provision if it amounts to rewriting the provision or if it amounts to changing basic nature/fundamental term of the contract
- COURT WILL APPLY BLUE PENCIL TEST to see if what remains after deletion still makes sense
- COURT MORE WILLING TO SEVER CLAUSE IF PARTIES EXPRESSLY AGREE TO IT
common clauses that are declared unenforceable
exclusion or limitation of liability
restraint of trade
RC
TABULATE THESE CLAUSES to allow for ease of severance
termination clause
prescribes: GROUNDS FOR TERMINATION + PROCEDURE TO BE ADOPTED (and sometimes, consequences)
1. upon the happening of the following events:
a) MATERIAL BREACH AND fail to remedy within 30 days of aggrieved party giving notice in writing specifying breach and breach required to be REMEDIED
b) ORDER MADE or resolution passed for WINDING UP of either party, or administrator is appointed
the aggrieved party may, by notice in writing immediately terminate this agreement
- termination of this agreement = without prejudice to the rights and obligations of any party accrued prior to termination
termination clauses - when may parties want to terminate?
- INSOLVENCY of a party
- BREACHES/DEFAULTS of a party under the contract
- right of a party to cancel/terminate WITHOUT CAUSE (e.g. at any time on 30 days’ notice)
- termination as a consequence of the parties having a DISAGREEMENT (e.g. deadlock provision in JV agreement)
DRAFTING termination clauses - points to watch out for
- does the breach have to be MATERIAL to justify termination? what does material mean?
- must terminating party give ADVANCE NOTICE to the other party when terminating the agreement - how is this calculated?
- OPPORTUNITY TO REMEDY THE BREACH FIRST - if so, how long?
- CONSEQUENCES of termination
- do rights/obligations under agreement CONTINUE after date of termination - how long for?
survival clauses - example
The provisions of clauses X and Y shall survive the expiry or prior termination of this Agreement
survival clauses - explanation
- means certain clauses continue to be binding even after termination/expiry
- some will survive without need for express clause but use one to avoid ambiguity
example clauses:
- confidentiality
- post-termination RC (e.g. non-compete)
- indemnities
- governing law and jurisdiction/arbitration
schedules
contain details
- ensures logical flow of clauses is not broken up by too much detail
- say schedule TO agreement (not of)
provision in schedule is called a paragraph (not a clause)
REMEMBER an operative provision to give effect to material set out in the schedule (otherwise unclear whether it is meant to be binding or not)
testimonium clause
usually immediately before execution clause (not essential but introduces the signatures)
agreements under hand: “EXECUTED/SIGNED by the parties”
deeds:
“EXECUTED/SIGNED and delivered by the parties as a deed”
if not properly executed
it may be unenforceable
if not executed as deeds when required in law to be - may not be effective
may not bind the principal (if someone signs it as agent/attorney but isn’t authorised to do so)
execution by an individual (agreement under hand)
Signed by [name]
……………………………..
execution by an individual (deed)
Signed as a deed by [name] in the presence of [witness]
…………………….
………………………
[name address and occupation of witness]
execution ON BEHALF OF a UK company (contract under hand)
Signed by [director] for and on behalf of [company]
………………………..
Director
execution ON BEHALF OF a UK company (contracts under hand) - background info
s.43(1) CA 2006 - contracts under hand can be executed on behalf of a company by a person acting under authority of the comapny
- usually BR authorises one or more directors to execute document
- single signature is sufficient
execution BY a UK company (contracts under hand) - background info
s.44 - contract under hand can be BY a company …
- affix common seal
- signature of 2 authorised signatories, or
- director in presence of a witness who attests signature
authorised signatories = director or CS
UNCOMMON METHOD for agreement under hand BUT relevant for execution of deeds
execution BY a UK company (deeds) - background info
s. 46(1) . CA 2006, if the document a company is entering into is a DEED, it is ONLY validly executed if…
- duly executed BY the company (i.e. seal, 2 auth sig, or director attested by witness)
and
- delivered as a deed
execution BY a UK company (deed) - sig of 2 authorised signatories
Signed as a deed by [company] acting by [auth. sig], a director and [auth. sig], a [director/secretary]
…………………….
Director
………………………
Director or Secretary
execution BY a UK company (deed) - sig of director in presence of a witness
Signed as deed by [company] acting by [director], a director, in the presence of [witness]
……………..
Director
………………..
name, address, occupation of witness
execution by a foreign company - background info
can be ON BEHALF OF a foreign company by any person (in accordance with laws of its territory/incorporation) is acting under authority (express or implied) of that company
whether it is properly executed depends on the law of its jurisdiction of incorporation - get legal advice from lawyers in that jurisdiction
execution ON BEHALF of foreign company (contract under hand)
Signed by [auth. sig] for and on behalf of [name of company]
……………………….
Authorised Signatory
execution BY a foreign company (deed)
affixing common seal
OR
manner permitted by the laws of its territory of incorporation
execution by company through an attorney - how?
companies can…
- authorise an individual to sign on behalf of the company (s.43(1)(b) CA 2006) or
- appoint an individual under a separate power of attorney to sign as ‘duly authorised attorney’
POWER OF ATTORNEY needs to be drafted (separate document)
power of attorney (the document)
- must be a deed
- can be general or limited to certain specific purposes or for a specified duration
- must be executed by a company complying with execution formalities of deeds
basic formalities = same as if agreement in own name
- BUT avoid suggestion that execution is on own behalf, express it is as attorney of donor and give details of the power
execution by UK company under POWER OF ATTORNEY (contract under hand)
Signed by [attorney] as duly authorised attorney for [name of donor company] under a power of attorney dated [date]
………………
Attorney for [donor comp]
execution by UK company under POWER OF ATTORNEY (deed)
Signed as a deed by [attorney] as duly authorised attorney for [donor comp] under power of attorney dated [date] in the presence of [witness]
…………..
Attorney for [donor]
……………
name address and occupation of witness
