When negotiating a merger or acquisition (M&A), it's easy to focus on the headline terms-purchase price, closing date, and representations. However, overlooking the so-called "boilerplate" clauses in an M&A agreement can lead to costly consequences. These standard provisions often determine how disputes are resolved, how notices are delivered, and how obligations are interpreted and enforced. Understanding which boilerplate clauses truly matter in an M&A deal can help protect your rights and reduce future liability.
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What Are Boilerplate Clauses?
Boilerplate clauses are standardized, often overlooked sections of legal contracts that appear at the end of most agreements. While they might seem routine, they can significantly influence the implementation and enforceability of the deal terms.
In an M&A contract, boilerplate clauses help define how the agreement functions when things don't go according to plan. Whether it's a dispute over indemnification, a conflict of governing law, or challenges with communication, these provisions quietly govern outcomes.
Why Boilerplate Clauses Matter in M&A Transactions
Boilerplate provisions in M&A agreements matter for three primary reasons:
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Risk Allocation - They allocate procedural and financial risks in post-closing scenarios.
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Dispute Prevention and Resolution - They pre-establish frameworks for interpretation and enforcement.
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Deal Stability - They maintain predictability and continuity if the parties' relationship deteriorates.
Let's break down the most consequential boilerplate clauses in the context of M&A transactions.
1. Governing Law and Jurisdiction Clause
This clause determines which state's laws will govern the agreement and where disputes will be adjudicated. In M&A deals, this can affect everything from contract interpretation to litigation costs.
Why It Matters:
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Some states are more favorable to sellers; others favor buyers.
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A well-chosen jurisdiction helps ensure predictability and control.
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Ambiguity can result in expensive jurisdictional disputes.
Key Considerations:
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Choose a jurisdiction familiar to both parties' counsel.
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Consider whether arbitration or litigation is more appropriate for the transaction size and complexity.
2. Entire Agreement Clause (Integration Clause)
This clause declares that the written agreement represents the final, complete expression of the parties' intentions.
Why It Matters:
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It prevents either party from claiming there were outside promises or representations not included in the agreement.
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Without this clause, prior emails or term sheets could be argued as part of the deal.
Practical Tip:
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Ensure every side agreement, side letter, or verbal commitment is included before signing.
3. Amendment and Waiver Clause
This clause sets rules for how the agreement may be changed or modified after execution.
Why It Matters:
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M&A deals often involve post-closing adjustments. Without a clear amendment process, changes can lead to legal challenges.
Common Requirements:
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Written agreement signed by both parties for any amendment.
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Waivers must also be in writing and are typically transaction-specific.
4. Assignment Clause
The assignment clause governs whether the buyer or seller can transfer their rights or obligations to another party.
Why It Matters:
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Buyers may want to assign rights to an affiliate or financing vehicle.
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Sellers may want to restrict assignment to ensure the buyer performs post-closing obligations.
Typical Approaches:
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Allow assignment with written consent.
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Permit assignment only in specific scenarios, such as internal reorganizations.
5. Notice Clause
This boilerplate clause details how formal communications between parties must be delivered-by mail, email, courier, etc.
Why It Matters:
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Disputes often hinge on whether proper notice was given.
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Time-sensitive clauses (like indemnity claims or termination notices) depend on accurate delivery.
Tips for Drafting:
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Specify valid addresses and electronic communication methods.
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Allow flexibility for modern forms of communication but confirm receipt requirements.
6. Severability Clause
This clause protects the rest of the agreement if one section is deemed unenforceable.
Why It Matters:
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Without severability, one invalid provision could potentially void the entire agreement.
How It's Used:
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Courts may strike unenforceable provisions while leaving the remainder intact.
7. Counterparts and Electronic Signatures
These clauses ensure that the agreement is valid even if signed in multiple copies or electronically.
Why It Matters:
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M&A deals often involve remote signings.
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Electronic signature acceptance is critical for fast-moving deals.
Modern Drafting Note:
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Ensure the clause complies with applicable e-signature laws like ESIGN or UETA.
8. Force Majeure Clause
This clause excuses a party's performance obligations under the contract when extraordinary events beyond their control occur-such as natural disasters, war, pandemics, or government shutdowns.
Why It Matters in M&A:
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A force majeure clause can protect parties during the interim period between signing and closing.
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Without this clause, a party unable to perform due to unforeseen circumstances may still face breach claims.
Key Drafting Points:
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Define "force majeure events" clearly and narrowly.
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Clarify whether payment obligations are excused (they often are not).
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Include notification requirements and specify the duration of excused performance.
9. No Third-Party Beneficiaries
This clause clarifies that the contract does not confer any rights or benefits to persons or entities not a party to the agreement.
Why It Matters:
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Prevents unintended parties-such as affiliates, employees, or creditors-from claiming rights under the agreement.
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Limits potential litigation from third parties asserting contractual claims.
When to Allow Exceptions:
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In certain deals, specific third parties (e.g., lenders or parent companies) may be granted rights.
10. Costs and Expenses Clause
This provision specifies how legal, accounting, and due diligence costs will be handled, both before and after closing.
Why It Matters:
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M&A deals often generate significant transaction costs.
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Allocating responsibility up front prevents later disagreements.
Common Allocations:
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Each party bears their own costs.
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Buyer may cover seller's expenses in certain strategic acquisitions or asset purchases.
11. Confidentiality Clause (Post-Closing)
While many deals have standalone NDAs before signing, the main agreement should reaffirm confidentiality obligations that survive closing.
Why It Matters:
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Buyers gain access to sensitive seller data pre-closing.
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Sellers may also receive proprietary buyer information.
Essential Terms:
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Duration of confidentiality obligations.
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Exceptions for legally required disclosures or publicly available information.
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Remedies for breach (e.g., injunctive relief).
12. Remedies Clause
This clause outlines what remedies are available in the event of a breach-damages, injunctions, or specific performance.
Why It Matters in M&A:
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Without clear remedies, disputes can escalate quickly.
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Buyers often push for specific performance to force closing if sellers attempt to back out.
Drafting Strategy:
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Preserve flexibility but define acceptable remedies.
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Include language allowing equitable relief when monetary damages are insufficient.
13. Survival of Representations and Warranties
This clause defines how long the seller's representations and warranties continue after closing.
Why It Matters:
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The survival period often determines when indemnification claims must be brought.
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Sellers want shorter timeframes; buyers want longer ones.
Typical Durations:
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12 to 24 months for general reps and warranties.
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Longer for fundamental representations (e.g., title, authority, taxes).
14. Indemnification Clause Cross-Reference
While indemnification provisions are not typically considered boilerplate, they rely on boilerplate clauses (like notice and survival clauses) to function properly.
Why It Matters:
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The enforceability of indemnification obligations can hinge on boilerplate terms.
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Failing to comply with notice provisions or survival periods can nullify a valid claim.
Integrated Approach:
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Review boilerplate clauses in light of indemnification strategy.
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Ensure alignment between procedural and substantive indemnity terms.
Tips for Reviewing Boilerplate Clauses in M&A Contracts
Legal teams should review boilerplate language with as much care as the headline terms. Here are several strategies to consider:
1. Don't Copy and Paste
Using template language without adjusting for the deal's specifics can result in inconsistencies and conflict with negotiated provisions.
2. Tailor Boilerplate to the Transaction Type
Asset purchases, stock purchases, and mergers all carry different implications for enforcement, assignment, and third-party rights.
3. Align with Due Diligence Findings
If diligence reveals risks around jurisdiction, tax, or regulatory approvals, ensure related boilerplate clauses support those concerns.
4. Use a Closing Checklist
Include boilerplate provisions in your final legal review checklist to ensure they haven't been overlooked or unintentionally altered.
Contact an Attorney for M&A Contract Drafting and Review
Boilerplate clauses aren't filler-they're foundational. They silently shape the enforceability, risk management, and post-closing dynamics of your transaction. Whether you're buying, selling, or preparing for due diligence, working with a knowledgeable M&A attorney is essential to protect your interests and ensure enforceability across all deal terms.
Heritage Law Office assists clients with drafting, negotiating, and reviewing business sale agreements. We'll help ensure your contracts-including every boilerplate clause-support your strategic and legal goals.
Contact us by either using the online form or calling us directly at 414-253-8500.
Frequently Asked Questions (FAQs)
1. What is a boilerplate clause in an M&A contract?
A boilerplate clause is a standard contractual provision typically included at the end of legal agreements. In M&A contracts, these clauses govern important procedural aspects such as how disputes are resolved, which law applies, how notices are delivered, and whether the agreement can be assigned. Though often overlooked, they are crucial for ensuring that the contract functions smoothly and predictably.
2. Why is the governing law clause important in an M&A deal?
The governing law clause specifies which jurisdiction's laws will control the interpretation and enforcement of the contract. This is important because different states may interpret contract terms differently. Choosing the appropriate jurisdiction helps reduce uncertainty and litigation risk if disputes arise.
3. How long do representations and warranties typically survive after closing?
The survival period for representations and warranties varies but is commonly 12 to 24 months for general provisions. However, fundamental representations-such as ownership, authority, and taxes-often survive longer, sometimes indefinitely. The survival clause in the boilerplate section controls these timelines and directly impacts the window for bringing indemnification claims.
4. Can an M&A contract be amended after signing?
Yes, but only if the agreement allows for it. Most M&A contracts contain an amendment and waiver clause that outlines how changes can be made. Typically, amendments must be in writing and signed by both parties. Without this clause, making enforceable changes post-signing can be challenging.
5. Are boilerplate clauses negotiable?
Absolutely. Although considered "standard," boilerplate clauses are not set in stone. They should be tailored to the specific needs and risks of the transaction. Issues like dispute resolution, notice delivery, and assignment rights can materially affect the outcome of a disagreement, and parties often negotiate these terms during the contract drafting process.