Boilerplate Clauses That Matter

What boilerplate clauses are and why they matter

Boilerplate clauses are the standard terms at the back of a contract, after the price, scope and deliverables. Most people skim them. That is a mistake, because these clauses decide who can take over the contract, what happens when a company is sold, which state's law applies and which terms outlast the deal.

Five of them cause the most trouble in practice:

• Assignment clause. Who can transfer the contract to someone else.
• Change of control clause. What happens when ownership of a party changes.
• Governing law clause. Which law interprets the contract and where disputes are heard.
• Survival clause. Which obligations continue after the contract ends.
• Order of precedence clause. Which document wins when two documents conflict.

Assignment clause and change of control clause: how they differ

An assignment clause controls whether a party can transfer its rights or obligations under the contract to a third party. A typical version reads:

A change of control clause covers a different event. It applies when the ownership of a party changes, even though the contract itself never moves to a new owner. A typical trigger is a person or group acquiring more than 50% of the voting shares, or all or most of the company's assets.

You need both clauses because one does not cover the other. If a company is bought through a stock purchase, the contract stays with the same legal entity. Nothing is assigned, so an assignment clause alone never fires. The change of control clause fills that gap.

An M&A scenario

Say your company, Northwind Analytics, signs a three-year software license with a vendor. Eighteen months in, BigCo buys 100% of Northwind's shares.

• The assignment clause says nothing about stock sales. Northwind is still the contracting party, so most courts will say no assignment happened. BigCo needs no consent.
• The change of control clause is where the risk sits. If the vendor's contract says a change of control requires 30 days' written notice and gives the vendor a right to terminate within 60 days of notice, BigCo may lose the software it counted on in the deal.

What to look for in an assignment clause

Check four things:

1. Consent standard. “Not unreasonably withheld” gives you room to move. A bare “consent required” lets the other side say no for any reason.
2. Affiliates carve-out. Many contracts let you assign to a parent or subsidiary without consent. If yours does not, a simple internal restructuring can breach the contract.
3. Operation of law. Language such as “by merger, operation of law or otherwise” extends the assignment clause to mergers.
4. Effect of a prohibited assignment. Some clauses make a non-compliant assignment void. Others only make it a breach.

What to look for in a change of control clause

• The trigger. A 50% ownership threshold is common. Some clauses use 25%, which catches far more events.
• The consequence. Notice only, consent or a termination right. Each has a different cost for the buyer.
• The window. A termination right that lasts 30 days is manageable. One that lasts forever leaves the deal exposed.
• Who the clause protects. A change of control clause that only binds the supplier is a different negotiation than one that binds both sides.

Governing law clause and jurisdiction

A governing law clause identifies the law used to interpret the contract. A typical example reads:

A jurisdiction clause covers the other half: where a dispute is heard. These are separate questions. A contract can be governed by New York law while requiring lawsuits to be filed in Texas. Mixing the two up is a common error, and it becomes expensive once a dispute arises.

Three examples

Why the choice of state matters

Delaware and New York are popular because their contract law is well developed and predictable. New York also has a statute that lets parties choose New York law for contracts worth $250,000 or more, even with no other connection to the state. California law, by contrast, restricts non-compete clauses and certain other terms, so parties cannot always contract around those rules.

When a small business signs a client's paper, it should check where the exclusive venue is. Defending a dispute over a $20,000 invoice in a court 2,000 miles away often makes the claim not worth pursuing. Ask for your own state or a neutral location.

Survival clause and what continues after the contract ends

A survival clause lists the provisions that stay in force after the contract expires or terminates. Without one, a court may decide that obligations ended with the contract.

Typical items to include in a survival clause

• Confidentiality
• Indemnification
• Limitation of liability
• Payment obligations for work already done
• Intellectual property ownership and license terms
• Governing law and dispute resolution

The most common error is a survival clause that cites the wrong section numbers after the contract was edited. If someone moves “Confidentiality” from Section 5 to Section 6 and nobody updates the survival clause, the protection may quietly lapse. Check the cross-references every time.

Order of precedence clause: when documents conflict

Most commercial deals involve several documents: a master services agreement (MSA), one or more statements of work (SOWs), an order form and sometimes a data processing addendum (DPA). They will disagree somewhere. An order of precedence clause says which one controls.

A practical case: the MSA caps liability at fees paid in the last 12 months, but the order form says liability is uncapped for data breaches. Without an order of precedence clause, both sides can argue their preferred document wins.

Watch for these problems:

• Order form at the top. Vendors sometimes place the order form first so that its terms override negotiated MSA protections.
• Silence on attachments. Policies linked by URL, such as an acceptable use policy, often sit outside the ranking and can change without notice.
• Specific vs general. Some clauses say the more specific term controls. That rule is vague, so name the document order explicitly.

Negotiation notes for each clause

How AI review reads these clauses

AI contract review tools handle these clauses well because their structure is repetitive. The tool identifies the assignment provision and flags a change of control trigger set at 25%. It compares every governing law provision against the locations you prefer, and checks that the section numbers in the survival clause still point to the right places. It runs the same checklist every time, because software does not get tired. The tool does the checking; you still decide which terms your position can accept.