Introduction

When founders negotiate contracts, attention is usually fixed on commercial terms—valuation, fees, deliverables, timelines, and exit rights. Clauses placed toward the end of an agreement under the label “Miscellaneous” or “Standard Terms” are often skimmed or ignored. These so-called boilerplate clauses are assumed to be routine, harmless, and non-negotiable.

In reality, boilerplate clauses frequently determine who bears risk, where disputes are fought, which law applies, and whether a contract can even be enforced. Many founders realise their importance only when a dispute arises—by which time the damage is already done. Courts routinely decide cases not on headline commercial terms, but on these overlooked provisions.

This article explains why boilerplate clauses matter, how founders commonly misunderstand them, and the legal consequences of ignoring them.

Legal Context

Under Indian contract law, boilerplate clauses carry the same legal weight as negotiated commercial terms. Once agreed, they are binding unless they violate statutory law or public policy.

Courts interpret contracts as a whole. There is no concept of “less important” clauses merely because they are standard or pre-drafted. The Supreme Court has consistently held that contractual intent must be gathered from the language used by the parties, and courts cannot rewrite or dilute clauses simply because one party later claims they were not fully understood.

In commercial contracts—especially between businesses—courts presume equal bargaining power unless proven otherwise. This makes it difficult for founders to later argue that boilerplate clauses were unfair, misunderstood, or casually accepted.

Key Boilerplate Clauses Founders Commonly Ignore

1. Governing Law and Jurisdiction

Founders often overlook clauses specifying the governing law and courts having jurisdiction. The assumption is that disputes will naturally be resolved where the business operates.

In reality, a poorly drafted jurisdiction clause can force a startup to litigate in a distant city or even another country. A clause conferring exclusive jurisdiction ousts the jurisdiction of other competent courts, even if the cause of action arose elsewhere.

For early-stage startups, the cost, time, and logistical burden of litigating in an unfamiliar forum can be crippling—often strong enough to force an unfavourable settlement.

2. Arbitration Clauses

Arbitration clauses are frequently accepted without scrutiny. Founders assume arbitration is faster and cheaper than courts, without examining the actual terms.

Issues commonly ignored include:

• Seat and venue of arbitration
• Number and appointment of arbitrators
• Language of proceedings
• Allocation of arbitration costs

An arbitration seated outside India or requiring a three-member tribunal can dramatically increase costs. Once agreed, courts are bound to refer parties to arbitration under the Arbitration and Conciliation Act, 1996, leaving little room for escape.

3. Indemnity Clauses

Indemnity provisions are among the most dangerous boilerplate clauses when left unchecked. Many founder agreements contain broad, one-sided indemnities drafted in favour of the counterparty.

Such clauses may require the startup to indemnify against:

• Third-party claims
• Regulatory penalties
• Intellectual property infringement
• Acts beyond the startup’s control

Without caps, exclusions, or procedural safeguards, indemnity obligations can expose founders to unlimited liability—sometimes exceeding the value of the contract itself.

4. Limitation of Liability

Founders often celebrate limitation of liability clauses without reading the fine print. The problem is not their existence, but how they are drafted.

Common pitfalls include:

• Caps linked to contract value rather than actual exposure
• Carve-outs that exclude indemnity, fraud, or statutory violations—effectively nullifying the cap
• Clauses that protect only one party

A limitation clause that appears mutual on paper may, in practice, leave the startup bearing disproportionate risk.

5. Termination and Survival Clauses

Termination clauses are often read only for notice periods, while survival clauses are ignored altogether.

Survival clauses specify which obligations continue even after termination—often including confidentiality, indemnity, dispute resolution, and payment obligations. Founders are frequently surprised to discover that liabilities persist long after the business relationship has ended.

Poorly drafted termination clauses may also allow the counterparty to exit freely while locking the startup into long-term obligations.

6. Entire Agreement Clauses

An entire agreement clause states that the written contract supersedes all prior discussions, emails, and representations.

Founders commonly rely on informal assurances given during negotiations—pricing flexibility, future commitments, or side understandings. Once an entire agreement clause is signed, those assurances become legally irrelevant unless expressly included in the contract.

Courts consistently uphold these clauses, leaving founders without recourse for promises that were never documented.

7. Amendment and Waiver Clauses

Clauses stating that amendments must be in writing and signed by both parties are often ignored. Founders may proceed on oral modifications or email confirmations.

In disputes, courts rely strictly on the contract. Informal deviations, past practices, or verbal assurances rarely override a clear amendment clause. This can invalidate operational arrangements founders believed were settled.

Practical Illustration

In multiple commercial disputes, Indian courts have refused to consider prior correspondence or oral assurances because of a clear entire agreement clause. Similarly, startups have been compelled to arbitrate overseas simply because the arbitration seat was buried in boilerplate text.

In indemnity disputes, courts have enforced broad indemnity language even where founders argued that risks were never commercially intended. The consistent judicial approach is simple: what is written governs.

Risks and Common Mistakes

The most common mistake founders make is assuming boilerplate clauses are “standard” and therefore safe. In reality, these clauses are usually drafted to protect the party with greater bargaining power.

Another frequent error is copying contracts from the internet or previous deals without understanding how boilerplate interacts with the specific business model. Clauses that are harmless in one context can be disastrous in another.

Finally, founders often underestimate how aggressively these clauses are enforced during disputes. Courts do not rescue parties from bad bargains simply because they later regret them.

Solution

The solution lies in treating boilerplate clauses as risk-allocation tools, not formalities.

Founders should:

• Read boilerplate clauses with the same seriousness as commercial terms
• Align jurisdiction and arbitration clauses with business practicality
• Narrow indemnities and introduce reasonable caps
• Ensure liability limitations are real, not illusory
• Document all critical understandings within the contract

At the drafting stage, clarity and balance prevent years of litigation. Once a dispute arises, courts will enforce the contract as written, not as intended or assumed.

Conclusion

Boilerplate clauses are not filler—they are often the most powerful parts of a contract. Ignoring them can shift risk, inflate liability, and determine the outcome of disputes long before they reach a courtroom or tribunal.

For founders, the real cost of boilerplate clauses is not theoretical. It appears in legal fees, forced settlements, operational disruption, and loss of bargaining power. Careful review and thoughtful drafting are not legal luxuries; they are business necessities.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice.