The Future Lawyer Weekly Briefing – W/C 19th June 2023

BOILERPLATE CLAUSES AND COMMERCIAL CONTRACTS

All contract clauses must be clearly defined, even more so with commercial agreements given the often significant transactions and greater implications for infringements. Clear definitions prevent ambiguity and crystallise the contracting parties’ positions and expectations.

Drafting a commercial contract can be arduous, even for the most experienced legal practitioners. At a fundamental level, the essential elements required for the enforceability of an agreement must be evident; offer, acceptance, consideration, certainty and intention.

On perhaps a more complicated level, the contract must contain commercial clauses, that is, ‘those operative provisions in business agreements which set out the balance of commercial risk agreed between the parties when fulfilling their primary obligations under a contract’ and the clauses governing the validity, enforcement and interpretation of the agreement, that is boilerplate clauses.

Examples of boilerplate clauses

Assignment

A clause that manages contracting parties’ ability to subcontract, transfer or assign rights to another party extraneous to an agreement.

Example: ‘This Agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party’.

Case law example: Gama Aviation (UK) v MWWMMWM Ltd [2021] EWHC 2229 (Comm)

Dispute resolution

A mandatory clause which compels contracting parties to resolve disputes via ADR, initially and primarily via mediation, before embarking on more litigious routes such as arbitration or the courts.

Example: ‘The parties agree not to initiate legal proceedings concerning a dispute unless they have tried and failed to resolve the dispute by negotiation’.

Case law example: AdActive Media Inc v Ingrouille [2021] EWCA Civ 313

Entire agreement

Otherwise known as a whole agreement clause, it excludes the reliance of privy parties on pre-agreement discussions or representations and negotiations not expressly arrayed in the finalised contract.

Example: ‘The Agreement herein constitute the whole agreement among the parties and no parties shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein’.

Case law example: NF Football Investments Ltd v NFCC Group Holdings Ltd [2018] EWHC 1346 (Ch)

Force majeure

This clause excepts liability for delays in performance or breach of contract in circumstances whereby unforeseen or extreme events prevent a party from honouring the terms of an agreement.

Example: ‘Neither party will be liable for inadequate performance to the extent caused by a condition (for example, natural disaster, an act of war or terrorism, labour condition, governmental action and Internet disturbance) that was beyond the party’s reasonable control’.

Case law example: European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm)

Joint and several liability

This clause originates from tort law and clarifies whether two or more promisors in a contract have joint or individual obligations to a promisee to perform the terms of an agreement.

It provides additional security for a promisee as it means that should an obligation not be fulfilled, they could seek remediation against one or both promisors consecutively or concurrently.

Example: ‘Each of the Sellers shall be jointly and severally liable for the performance of their obligations under this Agreement’.

Case law example: Rhinegold Publishing v Apex Business Development [2012] EWHC 587 (Ch)

Severance

This instrument ensures that if some contract terms are subsequently deemed invalid, illegal or unenforceable, the rest remain enforceable.

Example: ‘If any provision or part-provision of this Agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable’.

Case law example: Tillman v Egon Zehnder Ltd [2019] UKSC 31

The importance of a thorough review

Boilerplates construe the English common law stance and imply other legal provisions not otherwise covered by common law.

They are often mistaken as indiscriminate clauses, and thus their importance in commercial contracts diminished. Diminishing boilerplate clauses causes misery for commercial lawyers and clients alike.

Therefore, it is vital to thoroughly evaluate their inclusion, such as their appropriateness in the context and scope of specific transactions, whether they revise the security and positions of contracting parties with or without their inclusion, and whether there has been the omission of a boilerplate clause that is detrimental to a contract.

This is because, concerning a dispute, a court will primarily review said clauses to interpret or enforce an agreement. They are often the mainsprings in commercial litigation due to their appreciable impact on a contract.

Thus, meticulous and consistent adherence to drafting principles must be prevalent, especially when considering boilerplate usage in finalising commercial agreements.

Briefing by Aqua Koroma  

DISPELLING ‘IF AT FIRST YOU DON’T SUCCEED; TRY, TRY, TRY AGAIN’

The doctrine of res judicata pro veritate accipitur (‘a matter adjudged is taken for truth’), or res judicata for short, is a binding litigation principle formulated in English common law.

It is a decision given by a tribunal or judge with jurisdiction over the matter in dispute, giving it finality, thus expressing that a case cannot be relitigated except on appeal.

As the courts can strike out claims on account of this principle, the courts must be scrupulous of facts concerning each case before employing those powers.

In view of ensuring that nobody is unduly vexed or burdened with the same issue twice and maintaining that litigation is concluded as swiftly and justly as possible as a matter of public interest, Lord Sumption clarified the general principles encapsulated by res judicata in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160.

The principles

1. The cause of action estoppel prevents a party or its privies from reopening a case already decided in previous proceedings, except in fraud cases.
2. A claimant, who has succeeded in a case, may not bring a claim on the exact cause of action if they had failed to challenge its earlier outcome.
3. The doctrine of merger regards a matter as concluded once a judgment is passed. This means a claimant’s sole right is specific to that judgment.
4. Issue estoppel prevents a party from re-arguing an issue, typically a defence, arising from a previously litigated and judged cause of action, thereby preventing potential conflicting decisions on the same case.
5. The forestalling of the capability to bring forth claims in a proceeding cause of action which should have been raised in previous litigation. In short, parties should always present their entire case in the first instance.

Limitations

Procedural abuse is defined as the ‘use of a court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process’.

In consideration of this definition, res judicata seeks to prevent such abuse by prohibiting inefficiency and the wasting of both courts’ and parties’ resources and multiple recoveries of remedies, for example, damages, thereby protecting legal certainty and maintaining public trust in judicial decisions, whilst altogether mitigating unfairness in proceedings and bringing finality to litigation.

Yet, although its application is broad and jurisdiction-specific, there are some limitations and exceptions. An example is the principle’s irrelevance when a second case with similar facts as its predecessor contains sufficiently new evidence that warrants the re-examination of the initial proceedings.

Another is that res judicata is immaterial in claims of continuing wrongs (‘the repetition or continuance of a series of acts or omissions of the same act’). For instance, a party may bring an independent claim for a breach of contract after previously litigating a different cause of action concerning the same agreement and having won damages.

Also, where the court lacks jurisdiction, the principle would not apply. Because of its comprehensive ambit, there are risks of inconsistencies, likely exacerbated by the doctrine’s consideration of the turn of facts for each case.

Impact on the legal sector

Despite its limitations and its institution some years back, res judicata retains extreme relevance in the legal sector.

The compliance burden is on legal professionals as the experts to lessen the risk of their clients’ claims being struck out. Therefore, adequate and appropriate advice rendered from first contact, throughout and till the end of litigation is crucial.

To continue rendering the finest services to clients, it is detrimental that civil claims lawyers keep pace with this area of law as the principle remains dynamic, the same as with many others in law.

In the meantime, res judicata will continue to alleviate court caseload, mitigate procedural abuse and promote fairness for all in years to come.

Article written by Aqua Koroma