Compliance with other instruments: Overview, definition, and example
What is compliance with other instruments?
Compliance with other instruments refers to a contractual provision where a party guarantees that their actions, obligations, or performance under the current agreement do not conflict with or violate the terms of other agreements, contracts, laws, or obligations they are bound by. This ensures that the party is legally and contractually capable of fulfilling their commitments.
Why is compliance with other instruments important?
This clause is important because it provides assurance that a party’s obligations under the current contract will not create legal or contractual conflicts. For businesses, it ensures that parties have evaluated their existing commitments and legal frameworks before entering into the agreement.
Including a compliance with other instruments clause minimizes the risk of breaches, disputes, or invalid agreements by requiring parties to confirm that their obligations under this agreement are lawful and do not interfere with other obligations.
Understanding compliance with other instruments through an example
Imagine a company entering into a joint venture agreement. The compliance with other instruments clause ensures that the company is not breaching any exclusivity agreements or restrictive covenants in its existing contracts with other partners. This prevents legal disputes that could jeopardize the joint venture.
In another example, a borrower signs a loan agreement with a bank. The compliance clause states that the borrower’s obligations under the loan agreement will not conflict with any other financial agreements, such as existing credit lines or bond covenants. This ensures the borrower can lawfully comply with all financial obligations.
An example of a compliance with other instruments clause
Here’s how a compliance with other instruments clause might appear in a contract:
“Each Party represents and warrants that its execution, delivery, and performance of this Agreement do not and will not conflict with, result in a breach of, or constitute a default under any other agreements, obligations, or instruments to which it is a party or by which it is bound.”
Conclusion
Compliance with other instruments clauses ensures that parties are legally and contractually capable of fulfilling their obligations under an agreement without breaching other commitments. For businesses, this clause provides reassurance, promotes transparency, and reduces the risk of disputes or invalid agreements. Including this provision in contracts helps safeguard against conflicts, ensuring that all parties can perform their duties lawfully and without interference.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.