Back of the Agreement–Boilerplate Provisions
The term “boilerplate” dates back to the 1890s, when printing plates of text for advertisements or syndicated columns were cast or stamped in steel ready for the printing press and distributed to newspapers around the United States. They were called boilerplates because of their resemblance to the thick, tough steel sheets used to build steam boilers.
Eventually, the term was adopted in legal transactions to describe contract clauses that are considered "standard language." These terms are often dismissed as unimportant to the rest of the agreement or so routine that they should be included in the contract without thought to their consequences. Boilerplate, however, should be considered with the same seriousness as any other part of the agreement. This column is a regular series analyzing some of those "standard" provisions.
Most commercial agreements include a paragraph reading something like this:
Further Assurances. Each of the parties hereto shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder to carry out the intent of the parties hereto.
The purpose of this clause is to ensure that the parties will cooperate to accomplish whatever routine matters are necessary to fulfill the goals of the agreement. While one would hope and expect that the parties will cooperate (for example, by providing additional signed copies of documents or certifying to government authorities that agreements are authentic), including a further assurance clause that is broad and vague could lead to unreasonable requests for further assurances, disputes over whether the language covers such a request and debates about who pays for actions taken to provide "further assurances."
The parties to an agreement should consider including a further assurances clause, but also consider whether it should be qualified in some way. For example, the parties should try to foresee the additional agreements that are likely to be necessary and specifically provide for them. The general further assurances clause also might be qualified to provide that a party should not be required to incur expense or incur expenses in excess of a particular dollar amount or assume any liability as a result of the clause. The clause can expressly exclude certain actions as outside the scope of a further assurances request.
The bottom line with the further assurances clause is that, like all boilerplate, it has important legal consequences and can spring some nasty surprises on contracting parties when they haven’t given thought to what the clause can require parties to do as part of their contract obligations.
Michael A. Gold is a senior partner in the Corporate and Litigation Groups at Jeffer Mangels Butler & Mitchell LLP in Los Angeles. He counsels closely-held businesses and their owners on a wide range of matters, including early stage planning, liquidity events, control and governance issues, unfair competition and trade secret disputes and strategic contracting. For more information, contact Michael at 310. 201.3529 or MGold@JMBM.com
Robert Braun is a Partner at Jeffer Mangels Butler and Mitchell LLP in the Firm’s Corporate Department. Bob’s practice, spanning more than 20 years, focuses on corporate, finance, and securities law with an emphasis on emerging technologies, hospitality and business transactions. For more information, contact Bob at 310.785.5331 or RBraun@JMBM.com.