Contract Out
To exclude by agreement the application of a statutory right or default legal rule that would otherwise apply; parties "contract out" of implied terms by expressly agreeing to different terms.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Contract Out?
"Contracting out" means using an express contractual provision to exclude the application of a statutory right or a default legal rule that would otherwise govern the parties' relationship. For example, parties can contract out of the implied warranty of merchantability under UCC §2-314 by including a conspicuous disclaimer.
The ability to contract out of a rule depends entirely on whether the rule is a default rule (applies unless the parties agree otherwise) or a mandatory rule (applies regardless of agreement). Default rules fill gaps in contracts and can be displaced by express agreement. Mandatory rules - like minimum wage requirements, anti-discrimination protections, and basic consumer rights - cannot be contracted out of.
Courts examine whether the contractual exclusion is clear, conspicuous, and consistent with public policy. Attempts to contract out of consumer protection statutes, worker protections, or fundamental public policy are typically void and unenforceable.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Default vs. Mandatory Rules
Default rules (most UCC provisions, many common law rules) can be displaced by agreement. Mandatory rules (employment law, consumer protection, anti-discrimination) cannot.Conspicuousness Requirement
UCC §2-316 requires that warranty disclaimers be conspicuous - written in a way a reasonable person would notice. Courts apply similar standards to other statutory exclusions.Void Exclusions
An attempt to contract out of a non-waivable right is void. This does not void the entire contract - just the offending provision, unless it was central to the deal.Express Language Required
To contract out of a default rule, the language must be express and clear. Courts will not imply an exclusion of statutory rights.Real-World Example
A software vendor includes this clause: "THE SOFTWARE IS PROVIDED 'AS IS'. VENDOR DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE." The buyer claims the software didn't work as expected.
Under UCC §2-316, the vendor has validly contracted out of the implied warranties - the disclaimer is express and uses the required language. The buyer cannot claim breach of implied warranty. However, the disclaimer cannot contract out of express warranties the vendor made in marketing materials.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
Warranty Disclaimer (Contracting Out of Implied Warranties)Watch Out For
Consumer contracts have limits
Many state consumer protection laws (Magnuson-Moss Warranty Act, state lemon laws) restrict the ability to contract out of warranties for consumer goods. What works in B2B may not work in B2C.Employment rights are largely non-waivable
Attempting to contract out of minimum wage, overtime, or anti-discrimination protections is illegal. Employees cannot validly agree to waive these statutory rights in advance.Don't let contract out deadlines catch you off guard
Key dates tied to contract outs - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Know which rules are default and which are mandatory
Before including exclusion language, verify whether the rule you want to exclude is actually contractable-out-of in your jurisdiction. Purporting to exclude a mandatory rule can void the provision and expose you to regulatory penalties.Use conspicuous formatting for exclusions
Disclaimers and exclusions should be in capital letters, bold, or otherwise visually distinct. Hidden exclusions may be unenforceable as a matter of notice.Related Terms
Frequently Asked Questions
Can parties contract out of arbitration requirements?
Yes - arbitration is a default rule that parties can modify by agreement. They can agree to litigate instead, choose specific arbitration rules, or limit the scope of arbitrable disputes.
Can an employee waive their right to overtime pay in their employment contract?
No. The Fair Labor Standards Act's overtime provisions are mandatory rules that cannot be waived by contract. Any provision purporting to waive FLSA rights is void.