What You Need to Know About Boilerplate Contract Terms

Every legal agreement you sign is going to contain boilerplate terms, which are sometimes referred to as the “fine print.” It’s important that you understand these terms before you sign any agreement, because even though they may seem tedious to read, these terms will impact you and your business if and when you ever have to go to court to enforce the agreement.

Common Boilerplate Terms Found in Legal Agreements

Some common boilerplate terms that every agreement should have include the following:

1) Terms regarding the length of the agreement. Other similar terms located around these terms will also indicate how it can be terminated, by whom it can be terminated, and under what circumstances termination is possible. Make sure to look for these terms, as they are the foundation of the agreement.

2) Terms regarding intellectual property. These terms will indicate who owns it, how it gets handled, and whether it can be used by one or both parties. If you are the creator of intellectual property for a client, then you want your boilerplate to provide that you own all intellectual property you create until the contract is paid in full. If you are the employer of someone creating intellectual property of any kind—including written words, images, graphic design, or computer code—for your business, you want the agreement to stipulate that once the agreement is paid in full, you own the intellectual property created. This is called a “work-for-hire” provision, and if your agreement doesn’t include it, you are at risk of not owning what you’ve paid your team member to create.

3) Terms known as restrictive covenants. These provisions are designed to prevent one or both of the parties from engaging in specific actions once the relationship has ended. One type of restrictive covenant is a non-solicitation agreement, which means that one or both parties cannot solicit work with contacts made as a result of the relationship. Another such term is a non-compete agreement, which provides limitations on future work that can be done after the relationship is over. Finally, a non-disclosure agreement (NDA), or confidentiality agreement, prohibits one or both of the parties from disclosing any confidential or proprietary information—also known as trade secrets—learned during the relationship to any person outside the relationship. An NDA can apply both while the relationship is ongoing as well as after the relationship ends. Whenever you sign an agreement, it’s critical that you understand all of the restrictive covenants you are agreeing to, since they can impact you and your business even after the relationship has ended. 

4) Terms covering refunds. These terms will also indicate under what circumstances one of the parties can seek the return of consideration exchanged under the agreement. If you are selling products, your agreements need to cover the terms under which someone is buying your product and when they are entitled to a refund. For example, if your customers don’t like what they bought, your agreements should make it easy for them to review the terms of your refund process and clarify the circumstances under which you would provide a refund. If you are selling services, you may want to include a provision regarding chargebacks to a credit card, so it’s clear when chargebacks are allowed and when they are prohibited. 

5) Terms for conflict resolution. This will include how conflicts will be resolved, where they will be resolved, whether you must agree to mediation or arbitration before a lawsuit can be filed, and who covers legal fees in the event a lawsuit is necessary. 

When In Doubt, Ask For Guidance

Before you sign on the dotted line and before you begin negotiation, you should look for and clearly understand all of the boilerplate terms in your agreement. If you are ever asked to sign an agreement in which you don’t clearly understand all of the terms, you should consult with an experienced attorney.

When it comes to legal agreements, there is no such thing as a stupid question. In fact, we welcome your questions, since answering them is the best way we can support you. Always ask for guidance from trusted counsel before you sign, because once you sign, it’s too late—you’ve already entered into an agreement and are bound by the terms, regardless of whether you fully understood them or not. Contact us today to learn more.

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Dahl Law Group

At Dahl Law Group, we’re not just a law firm. We’re your trusted advisor for your business and family from beginning to end. As your family and business grow, we will be there by your side. Our passion is providing you with peace of mind and protection through personalized estate and business planning.