Exclusion - Regulatory Authorities

Contract Type:
Generic Contract

No party shall be liable for any delay or failure to perform its obligations under this Agreement if such delay or failure is caused by any governmental authority, including any regulatory authority.


Here is a plain English explanation of the Exclusion - Regulatory Authorities clause:

This clause states that neither party is responsible if a government agency or regulatory body causes delays or non-performance under the contract.

Examples of regulatory authorities could be financial regulators, competition authorities, sector-specific agencies, etc.

The purpose is to exclude liability if actions imposed by authorities - like approvals, licenses, investigations, bans, etc. - interfere with contract obligations.

Parties cannot claim damages or other remedies from each other if regulators cause non-compliance.

However, the parties would still need to make reasonable efforts to meet obligations once restrictions are lifted.

In summary, this clause prevents parties from being penalized if government or regulators cause contract delays or block performance. The exclusion is meant to allocate that risk away from the contracting parties.

History of the clause (for the geeks)

Exclusion clauses related to government and regulators arose in tandem with the expansion of regulatory power over private transactions.

Key historical developments include:

Early English common law focused narrowly on the contracting parties, with minimal consideration of external authorities. As regulation of business increased, unpredictable official interventions started to impede contracts. Courts began to recognize frustration of purpose when public policies blocked contracts. However, parties sought to specifically exclude liability from regulatory actions. Sophisticated transactions started to allocate risk of regulatory non-approval.

In highly regulated sectors like finance and insurance, excluding liability for government actions became common practice. As international transactions grew, parties excluded liability when foreign authorities blocked payments or performance abroad. With the rise of technology regulation, clauses emerged to exclude liability if new rules prevented contracted activities. Increased antitrust oversight led to exclusions when mergers were blocked for competition reasons. More recently, data privacy regulations have been cited in disclaimers limiting liability for cross-border data transfers.

In essence, exclusions for government and regulators emerged in tandem with the growth of the modern regulatory state.

They delineate where private and public spheres of authority start and end.