Imagine your company signs a lucrative deal to sell products to a large multinational company based in Germany. Then, imagine that your products are shipped to a small affiliate of that multinational in Moldova. After delivery, there is a dispute over the quality of your goods, and your customer refuses to pay. You believe that the customer improperly handled the product, but do you have the negotiating strength to achieve a fair result? This is not an imaginary scenario, but is based on experiences of a real client.
Unfortunately, after this dispute arose, the U.S. company realized that the sale contract required any dispute to be resolved under German law and any court proceedings to take place in Europe. That greatly favored the buyer and put the U.S. seller at a huge disadvantage.
This problem might have been avoided if the U.S. seller had carefully reviewed all of the “boilerplate” terms at the end of the contract. Boilerplate provisions are often overlooked, but they can have a huge impact on your company’s rights in case of a dispute. Many smaller companies keep a close eye on their legal budget, and therefore don’t have a lawyer review all contracts. They may even re-use the same contract for years without re-evaluating whether it makes sense for a specific deal. Other clients find contract templates on the Internet and utilize them without really understanding their implications.
Some examples of problematic “standard” terms can include: Assignment; Termination; Notices (e.g., how quickly will certified mail really be delivered to or from Africa); Controlling Law; and Location of Court.
Boilerplate serves important legal functions, and should not simply be deleted; but, neither should it be blindly accepted. You need to read and understand it. This up-front effort and investment can save your company time and money in the long run.
