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Comparative Contract Law Part III: Boilerplate clauses

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1 Comparative Contract Law Part III: Boilerplate clauses
LLM - Comparative Law Course 522 Dr Myra Williamson KiLAW Spring Semester 2013

2 Overview So far, we’ve looked at the general law of contract in the common law We’ve tried to learn more about what constitutes a contract specifically in the UK We’ve also learnt about performance, breach and remedies We’ve been learning about the general rules and principles for contract law Now we will look at one particular issue in contract law We could choose any number of issues but we’re going to look at a common issue related to drafting commercial contracts: the effects of ‘boilerplate clauses’ This topic includes both theory and practice: the theory of contract law and the day-to-day practices of commercial lawyers

3 Why this issue? Why now? All countries use contracts for commercial purposes Because of the principle of “freedom of contract” the parties want to set out all the terms that they have agreed to Many parties use a common law style of drafting (with long contracts & many standard clauses) using the English language but they subject the contracts to the laws of civil law legal systems This issue should be relevant to Kuwait’s commercial environment, as well as neighbouring countries, which probably also draft their commercial contracts in English (what is your experience here?) It provides an interesting crossover between theory and practice It throws up some interesting problems for comparative law It provides an opportunity for a common law v civil law legal system comparison as well as comparison within civil law legal systems This topic comes at the end of our ‘comparative contract law’ unit - drawing together some things we already know about

4 Objectives To learn what ‘boilerplate clauses’ are
To consider how and why they are used in contracts To consider how common law and civil law legal systems interact in the interpretation of boilerplate clauses To take a few examples and examine how a civil law country will apply a common law-type contract To use comparative law method and apply it to the practice of international commercial contracts To combine theory and practice in comparative law To learn about a research project in this area undertaken by the University of Oslo – we’ll look briefly at some of the problems they considered

5 Reading Ewan McKendrick Contract Law – Text, Cases and Materials 3rd ed (Oxford University Press, 2008) Chapter 12 “Boilerplate Clauses” Giuditta Cordero-Moss (ed) Boilerplate Clauses, International Commercial Contracs and the Applicable Law (Cambridge University Press, 2011) Clifford Chance “Boilerplate Clauses in English Law Contracts” List of some typical boilerplate clauses: Contracts and Agreements

6 Definition: what are boilerplate clauses?
Standardised terms in contracts that are usually the same in all contracts These clauses are sometimes negotiated but are often included without much discussion They are often towards the end of the contract They are often not even read – or read closely They aim at covering all possible eventualities Their objective is to render the contract self-sufficient – the rationale is that the contract should define the relationship between the parties in all areas Another way of putting it: their objective is to exclude the operation of the law by writing down all the terms that will affect the relationship between the parties

7 Boilerplate? What does the word mean?
The word “boilerplate” refers to any text that can be used in new situations without much change from the original “Boilerplate” originally referred to the metal, maker’s label attached to steam boilers:

8 Where and why are they used?
Originally, the idea of drafting a lengthy contract with many standard clauses came from the common law At common law, the parties are entitled to define their contractual relationship as they wish (‘freedom of contract’) so they would logically want to cover all possibilities However, this common law practice has spread - it’s now adopted in most international contracts, even when they are not subject to a law belonging to the common law family It is now quite normal for civil law contracts to be drafted in a common law style with extensive boilerplate clauses

9 Common boilerplate clauses
General clause Retention of title clause Price escalation clause Interest Force majeure Choice of law Arbitration Jurisdiction (this list is taken from Schmitthoff, as cited in McKendrick at p400 – it’s in the reading I handed out)

10 University of Oslo’s list of boilerplate clauses
Entire agreement No Waiver No oral amendments Severability Conditions/essential terms Sole remedy Subject to contract Material adverse change Liquidated damages Indemnity Representations and warranties Hardship Force majeure

11 Comparative law problems
A common law drafting style creates a contract that might be subject to the laws of a civil law country Common law and civil law systems present various differences regarding interpretation of contracts Which should prevail? “When an international contract governed by a civil law system is written in the common law style, a tension may arise between the different legal traditions” Giuditta Cordero-Moss (ed) Boilerplate Clauses, International Commercial Contracs and the Applicable Law at 2

12 University of Oslo research project
See this link for a quick summary See this link for a more detailed summary A research project that ran for 4 years at the University of Oslo, one of Northern Europe’s most prestigious universities The research project was called: “Anglo-American Contract Models and Norweigan or other Civilian Governing Law” The researchers wanted to see what happens when an essentially common law contract is interpreted by civil law courts A book was published as a result of the research undertaken (see me for a copy or extracts)

13 The Project In short, a group of (mainly) Norweigan legal researchers wanted to learn more about why civil law legal systems (including Norway, Germany, Italy, France, Denmark, Finland, Sweden, Hungary, Russia) draft commercial contracts in English, using an English-style of drafting and what happens when those English-styled boilerplate clauses are subjected to civil law courts - how are the clauses interpreted The project was led by Giuletta Cordero-Moss There were 3 parts to the project Click here and go to p17 to read about what they were interested in:

14 Some conclusions of the University of Oslo project
There is a gap between the way in which international contracts are written and the way in which they are interpreted and enforced Considering contracts to be self-sufficient and not influenced by any national law (as if they enjoyed a uniform interpretation thanks to their own language) is illusory because governing laws may contain mandatory rules that may not be derogated from by contract

15 Conclusion Boilerplate clauses are an interesting example of how civil and common law systems overlap and interact They are an interesting example of how the theory and practice of contract law interact What is your experience in Kuwait: Are commercial contracts drafted in English? Are commercial contracts here relying on boilerplate clauses? Can you see any potential problems in interpreting the clauses in Kuwait if written in an English common law style? Do you know of any cases or studies in this area?

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