Contracts serve as the backbone of business and real estate transactions, establishing rules and expectations for all parties while providing the cornerstone of legal certainty. To streamline the drafting process, lawyers and businesses frequently rely on “boilerplate clauses”—standardised contract provisions commonly reused across different agreements without modification.
Boilerplate clauses are the routine, generic terms typically found at the end of contracts that govern fundamental aspects such as governing law, dispute resolution, force majeure, amendment procedures, and confidentiality. These clauses set out the legal framework that ensures the contract operates smoothly and remains enforceable, covering issues like how notices must be delivered, what happens if part of the contract is invalid, and whether rights can be waived or assigned.
While boilerplate clauses offer undeniable convenience and promote consistency, their use without careful review or customization to the specific transaction can lead to significant legal risks—particularly in jurisdictions like Singapore, where courts apply rigorous interpretation to commercial contracts. Relying on generic, un-customised boilerplate provisions may result in unintended consequences, contractual ambiguities, or unfavourable dispute outcomes.
This article explores the legal risks associated with boilerplate clauses in contracts, examining why overreliance on generic language can be detrimental. It analyses the judicial approach to these provisions, highlights key clauses that often cause disputes, and offers practical guidance on mitigating associated risks through thoughtful drafting and review.
Understanding Boilerplate Clauses
Boilerplate clauses constitute standard provisions found in almost every contract, regardless of their specific nature. These provisions are often perceived as administrative or general clauses, distinct from core commercial terms such as price, quantity, or service specifications. Legal practitioners frequently copy these clauses from precedent documents or templates and include them with minimal negotiation, assuming universal applicability. In Singapore, where contracts are governed by common law principles supplemented by statutes like the Contracts (Rights of Third Parties) Act, 2001 and the Singapore International Arbitration Act, 1994, boilerplate clauses play a critical role in defining the legal framework of an agreement.
The term “boilerplate” originates from the 19th-century printing industry, where standardised metal plates were used for repetitive text. In the legal context, boilerplate clauses serve a similar purpose: they provide consistency, save drafting time, and address routine legal matters. Common examples include:
- Governing Law Clause: Specifies that Singapore law governs the contract
- Dispute Resolution Clause: Outlines whether disputes will be resolved through arbitration, mediation, or litigation in Singapore courts
- Force Majeure Clause: Relieves parties from liability for events beyond their control, such as natural disasters
- Severance Clause: Ensures that if one provision is invalid, the rest of the contract remains enforceable
- Entire Agreement Clause: Confirms that the written contract represents the complete agreement, superseding prior negotiations
These clauses are typically viewed as generic, technical, and non-controversial. However, this perception leads to their frequent use without proper scrutiny or adaptation to the specific contract or jurisdiction.
Legal Risks of Generic Boilerplate Clauses
Ambiguity and Misinterpretation
One of the primary risks of using generic boilerplate clauses involves ambiguity, which can lead to misinterpretation by courts or arbitral tribunals. Generic language may not clearly address the specific circumstances of a transaction, leading to potential misunderstandings and disputes. In Singapore, courts interpret contracts based on the parties’ intention as objectively determined from the contract’s wording. When a boilerplate clause is ambiguous, it may not accurately reflect the parties’ intentions, leading to unintended obligations.
A poorly drafted boilerplate clause, such as a vague dispute resolution clause stating only “arising out of or in connection with,” lacks temporal specificity and is broad enough to encompass disputes arising from pre-contractual conduct that may have led to the parties entering into the contract, thus widening the scope of the dispute resolution clause. To avoid such risks, parties must ensure clarity and specificity, tailoring clauses to the contract’s context.
Inconsistency with Contractual Intent
Generic boilerplate clauses may not align with the parties’ specific intentions, leading to outcomes contrary to their expectations. In Ebony Ritz Sdn Bhd v Sumatec Resources Bhd2, the contract contained a cumulative remedies clause stating that the rights and remedies provided in the agreement were cumulative and not exclusive of any other rights or remedies available by law. This clause allowed the buyer (Ebony Ritz) to claim remedies outside the specific contractual remedies listed in the agreement; thus, Ebony Ritz could claim for the shortfall in cash, even though this was not one of the listed contractual remedies. The court noted that the cumulative remedies clause allowed the buyer to pursue additional remedies beyond those explicitly listed in the contract, which was not the likely original intent of the parties.
In CIFG Special Assets Capital I Ltd v Ong Puay Koon and others and another appeal, the indemnity clause in the Convertible Bond Subscription Agreements (CBSAs) was extremely broad, potentially covering a wide range of liabilities and extending to parties not even involved in the CBSAs. The Court of Appeal held that the broad wording of the indemnity clause could not be interpreted to override the specific allocation of risks and liabilities negotiated by the parties in other parts of the CBSAs. The court emphasised the importance of considering the context in which the clause was introduced, noting that the clause was part of a suite of agreements where risks were specifically allocated to different parties.
This highlights the importance of ensuring that boilerplate clauses are consistent with the parties’ intentions and the overall structure of the contract.
Inconsistent Jurisdiction and Governing Law Clauses
A common boilerplate clause includes a provision selecting a specific jurisdiction or forum for dispute resolution. However, Singapore’s status as a hub for international business and arbitration means that contracts often involve parties from different jurisdictions. Carelessly drafted jurisdiction clauses may create uncertainty about whether the clause is exclusive or non-exclusive, potentially resulting in parallel proceedings in multiple jurisdictions, which may lead to enforceability issues for judgments or arbitral awards.
In Rappo, Tania v Accent Delight International Ltd4, the Court of Appeal addressed a dispute over the governing law and jurisdiction of subsequent transactions between the parties. The initial agreements between the parties included clear jurisdiction clauses favouring Swiss law and the courts of Geneva. Subsequent transactions were conducted based on invoices without explicitly reaffirming these clauses, leading to ambiguity. The respondents argued that each transaction was separate, while the appellants argued that the initial terms continued to apply. The Court of Appeal, applying the Spiliada test, found that Switzerland was a more appropriate forum for the dispute due to the governing law and personal connections, and ordered a stay of proceedings in Singapore.
Unintended Consequences in Dispute Resolution
Many contracts include jurisdiction and arbitration clauses without considering practical implications. A generic clause stating “disputes shall be resolved in Singapore courts” may not account for cross-border enforcement issues. Poorly drafted arbitration clauses (such as “any disputes shall be referred to arbitration”) may be invalid if they lack specifics on rules, seat, and appointment of arbitrators.
In Insigma Technology v Alstom Technology, the Singapore Court of Appeal upheld a hybrid arbitration clause that required disputes to be resolved “by arbitration before the SIAC in accordance with the ICC Rules,” despite initial objections from Insigma regarding its ambiguity and workability. Although Insigma first argued that the arbitration should be administered by SIAC under the ICC Rules, it later claimed the clause was void for uncertainty. The Court held that the clause was enforceable and workable, particularly because SIAC agreed to administer the arbitration using the ICC Rules. Emphasising the importance of upholding the parties’ intention to arbitrate, the Court clarified that ambiguity alone does not render a clause invalid if a reasonable interpretation is possible. The decision also serves as a cautionary tale about the use of permissive language like “may” in arbitration clauses, which can inadvertently allow litigation, leading to delays, increased costs, and a loss of confidentiality.
Severability Clauses May Not Save Invalid Provisions
Many boilerplate contracts include severability clauses stating that if any part of the contract is invalid, the rest remains enforceable. However, in Singapore, the effectiveness of such clauses depends on whether the remaining parts of the contract can still operate independently and achieve the commercial purpose.
In Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd, the court addressed the enforceability of non-competition and non-solicitation clauses in an employment contract. The plaintiff, after resigning to start her own business, challenged these restrictive covenants as void. The non-compete clause barred her from operating in similar businesses across Singapore, Malaysia, and other countries where the defendant operated, while the non-solicit clause restricted her from approaching the defendant’s customers for two years post-employment. The defendant claimed the clauses protected trade secrets and customer connections, but the court found them unreasonably wide. The term “relevant company” was overly broad, potentially covering unrelated businesses in the defendant’s group, and the geographic scope included regions like Malaysia, where the defendant had no operations. The court ruled that the covenants were unenforceable and could not be saved through severance, as doing so would fundamentally alter the agreement. Additionally, the severance would not meet public policy requirements, as outlined by Lord Sumption, and thus the entire clauses were struck down.
Best Practices for Singapore Businesses
- Contextualisation over Standardisation
Boilerplate clauses should be customised to reflect the specific context of the transaction, including the jurisdiction, industry, and nature of the agreement. Drafters should avoid the temptation to “copy-paste” and instead tailor provisions to fit the specific facts, commercial objectives, and risk allocation strategy of the particular contract. This can help avoid ambiguity and ensure that the clauses are effective in achieving their intended purpose.
- Regular Review and Update
Periodically review and update standard contract templates and boilerplate clauses to reflect changes in law, industry practice, and business needs. What may have been appropriate contractual language five years ago may no longer provide adequate protection or compliance assurance.
- Legal Expertise
Engage experienced legal counsel to review and draft all contracts, especially those involving significant value or complex transactions. Legal professionals can provide valuable insights into the specific legal requirements and potential pitfalls associated with boilerplate clauses. They can also ensure that clauses are drafted in a manner that is consistent with the parties’ intentions and the overall structure of the contract.
- Clear and Unambiguous Language
Ensure that all clauses, including boilerplate, are drafted in clear, precise, and unambiguous language. Avoid jargon where possible. Ambiguity often leads to disputes and allows courts more leeway in interpretation.
Finally, businesses should consider the long-term relationship implications of their contractual terms, ensuring that clauses promote collaboration and provide clear mechanisms for addressing disputes before they escalate to formal legal proceedings.
Conclusion
Singapore’s emphasis on contractual certainty, commercial reasonableness, and regulatory compliance calls for a more deliberate and thoughtful approach to contract drafting. Businesses that invest in well-tailored contractual provisions, developed with proper legal guidance and reviewed regularly, will be better protected, more compliant, and more successful in their commercial dealings.
The false economy of relying on boilerplate clauses often becomes clear only when a dispute arises and parties discover that their generic provisions offer inadequate protection or clarity. At that point, the cost of obtaining legal advice at the outset seems minimal compared to the expense and disruption of resolving contentious legal issues.
In Singapore’s competitive and sophisticated business environment, investing in carefully drafted contractual terms is not just advisable. It is essential for long-term commercial success.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. For more information, email us at info@silvesterlegal.com
