Business, Legal & Accounting Glossary
Boilerplate is standard generic verbiage which is repeated verbatim in numerous contracts, agreements, licenses or other documents. Boilerplate material is often inconsequential, non-specific and applies to everyone equally. Boilerplate can be a one-size-fits-all template, a generic fill-in-the-blank form or simply standardized pre-printed text often referencing generalized terms and conditions. With the proliferation of personal computers, it has become a simple matter to print out boilerplate documents for any number of people. However, in some cases, boilerplate language is simply a placeholder in a document until the document can be personalized to reflect the specific details of the matter to which it pertains. It is generally considered derogatory to refer to something as boilerplate. Boilerplate also refers to any hackneyed or formulaic writing.
n., adj. slang for provisions in a contract, form or legal pleading which are apparently routine and often preprinted. The term comes from an old method of printing. Today “boilerplate” is commonly stored in computer memory to be retrieved and copied when needed. A layperson should beware that the party supplying the boilerplate form usually has developed supposedly “standard” terms (some of which may not apply to every situation) to favor and/or protect the provider.
Boilerplate is a lawyer’s word referring to “standard” terms and conditions contained in most financing agreements but that are rarely negotiated when the major terms of a deal are discussed.
They are not, however, as standard or innocuous as many people believe (or would lead others to believe). In fact, boilerplate often consumes more than half of a financing agreement and contains important promises and representations made by the company and its principals. These promises and representations should be reviewed carefully, even if the tendency is to skip them because “they are just boilerplate.”
One standard provision that appears in many financing agreements is the “accurate business plan” boilerplate. Its purpose is to assure the investor that management has not made any misrepresentations in its business plan. It usually appears in the representations and warranty section of the financing agreement and is a warranty of both the company and its management. It is a legitimate provision that can have very different effects depending on whose boilerplate is used. The provision sometimes appears as a representation that:
The business plan of the company is accurate and complete and does not contain any untrue statement or omit to state any fact which is necessary in order to make the statements contained therein not misleading.
A literal reading of this particular boilerplate can make company management a guarantor of the facts, assumptions, and conclusions contained in the business plan. If any of those facts, assumptions, and conclusions turn out to be untrue, the company and its management could wind up liable to the investor for damages. Since much of a business plan is based on “soft” information instead of hard, verifiable facts, and since much of it is judgmental and prospective, business plans almost always turn out to be untrue in some respect. And when they do, management making this representation may find itself surprised by the liability it has assumed.
A better boilerplate provision about the company’s business plan, at least from management’s perspective, would read:
To their knowledge, the business plan does not contain any untrue statement of a material fact or omit to state a material fact that is necessary in order to make the statements contained therein not misleading in light of the circumstances under which they are made. To their knowledge, the financial projections contained in the business plan were prepared accurately based on the assumptions described therein.
This boilerplate gives the investor what he needs with less exposure to the company and its key officers. It talks in terms of knowledge instead of absolute facts and acknowledges that the projections are merely estimates based on disclosed assumptions. These differences can be important as a company’s progress varies from its projected plans. For management, they can mean the difference between business as usual and defending a lawsuit brought by an investor.
Every lawyer has his own version of “standard” boilerplate. Some are more exacting than others. All boilerplate terms are negotiable, notwithstanding any claims by their authors that they are “standard” or “required as is” in all of their deals. Management should never sign an agreement until it is comfortable with the boilerplate it contains.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Boilerplate are sourced/syndicated and enhanced from:
This glossary post was last updated: 30th December, 2021 | 0 Views.