Towards the end of every contractual agreement, including real
estate purchase agreements and leases, are certain provisions that often come
under the heading of “Miscellaneous” or “General Provisions” and are often
referred to as the “boilerplate” provisions.
While these provisions may be “boilerplate” in the sense
lawyers insert them into nearly every agreement, they remain important and
should not be ignored. Below is a summary of some of these
provisions and their purpose:
Entire Agreement – Most agreements have a section
captioned “Entire Agreement” or “Integration.” The purpose of this section is
to clarify that the entire agreement of the parties is embodied in that written
agreement, and prior agreements (verbal or written) are integrated into this
current signed contract and no longer have separate force and effect. If a party
to the agreement later asserts that there were other agreements
between the parties and these other agreements
pre-date of the signed
agreement containing an integration clause, then the earlier agreements will be considered merged into the newer agreement and enforceable. If there are
other agreements that the parties want to remain in effect concurrently with the new contract, then they must revise this ‘boilerplate’ provision to reflect this.
Binding Effect; Assignment – Most contracts include a provision that
states the agreement will be binding upon the parties’ successors and
assigns. If a company is bought out, you
may want to ensure the acquirer is still bound to honor the obligations in the
contract. A separate issue to address is
what limitations should be placed on a party’s ability to assign the agreement
without the other party’s consent. If a buyer on a real estate purchase
agreement intends to create a new entity prior to closing to own the real
estate, then it will be important to include language allowing the buyer to assign
the agreement to an affiliate.
Severability – This provision is included to ensure
the entire contract isn’t voided if a court finds that one or more the
provisions are unenforceable. It allows
the unacceptable provisions to be severed by the court and the remaining terms
of the contract are still enforceable. However, there may be instances where
certain provisions are so important to the purpose of the contract, that if a
court strikes out any of those provisions, the parties will not want the contract to continue. In that case,
a severability clause should not be included in the agreement.
No Waiver – The purpose of a waiver provision is to
make it clear that a party can waive one or more breaches and still be free to
act on a similar breach later. Without such a clause,
the breaching party could argue before a court that prior waivers of a breach by the other party created a ‘course of dealing’ that amends the contract and
the court might agree.
Governing Law; Venue – Governing law matters in an
agreement. The laws in one state may be, and often are, vastly different from
the laws in other states.
Which state’s law governs can effect the outcome of a lawsuit. Some contracts also include venue
provisions. Be aware that an agreement to litigate in courts of a specific state,
or even a specific county within a state, will typically be upheld.
Notice – The notice section of a contract dictates how notices under the
agreement should be delivered and to what addresses. It is important to follow the requirements in
this section precisely if a formal notice under the agreement is given. For
example, don’t email or fax a notice to the other party unless the agreement
expressly allows for it.
_____________________________
No comments :
Post a Comment