- Contractual "Boilerplate" Provisions Merit Attention
- June 19, 2012 | Authors: Daniel A. Etna; Irwin A. Kishner
- Law Firm: Herrick, Feinstein LLP - New York Office
The Delaware Court of Chancery resolved a dispute over conflicting contractual "boilerplate" provisions. The dispute arose out of an indemnification claim made by two entities which subsequently merged into a new successor entity. The successor entity sought to continue to assert the indemnification claim.
The defendant argued that under the assignment provision contained in the operative agreement, the successor entity could not enforce its predecessor's indemnification rights. The assignment provision provided that a party's rights could not be assigned by operation of law or otherwise without the prior written consent of the other parties. The successor entity countered by relying on a separate cumulative rights provision stating that the right of any indemnified party extended to such indemnified party's successors and assigns.
The court found that each provision when read in isolation was in direct conflict with the other. The court, after having not been offered any extrinsic evidence to resolve the ambiguity over the intended meaning of the parties, ruled that the successor entity's indemnification claim could proceed. The court noted that the dispute could not have been avoided if the operative document had been drafted more carefully. For example, the inclusion of the word "permitted" before the word "successors" in the cumulative rights provision would have negated any conflict with the assignment provision.
ClubCorp, Inc. v. Pinehurst, LLC, C.A. No. 5120-VCP (Del. Ch. Nov. 15, 2011).