Each party shall comply with all laws applicable to its obligations under this Agreement.
Here is a plain English explanation of the Compliance with Laws clause:
This clause requires both parties to follow all relevant laws when carrying out their duties under the contract.
For example, the supplier must comply with applicable employment, health and safety, and data protection laws. The client must comply with laws related to payment, intellectual property, and anti-bribery.
The laws that apply depend on each party's role and obligations in the agreement, as well as the governing jurisdiction.
This establishes a mutual responsibility to adhere to legal requirements. It ensures the parties avoid unlawful conduct that could jeopardize the other's interests.
In summary, both sides must act lawfully in fulfilling the contract.
This covers laws directly governing their contractual obligations as well as any other relevant laws.
The compliance with laws clause emerged from the basic legal principle that contracts must comply with mandatory laws.
Key aspects in its evolution include:
- In the 19th century, English courts established that contracts violating statutes were unenforceable as against public policy. This laid the foundation for regulated compliance.
- By the early 20th century, US contract drafters included compliance clauses out of caution as regulatory statutes multiplied. Courts upheld these as binding contractual duties.
- As complex cross-border contracts expanded post-WWII, mutual compliance clauses helped ensure international deals met varying domestic laws.
- Over time, compliance clauses became standard contractual risk management as regulations increased across sectors like environment, data privacy, and anti-bribery.
- Boilerplate compliance language gave way to more tailored provisions enumerating relevant statutes or targeting high-risk areas. Enhanced compliance terms appeared in regulated industries.
- Today compliance clauses remain vital in allocating multi-jurisdictional regulatory risks. Customization for specific laws and obligations continues improving contractual compliance.
In summary, the compliance with laws clause evolved from common law doctrine into a versatile contractual device for distributing regulatory risk across parties and legal systems.
It remains a pillar of contractual compliance.