Compliance with the law: Overview, definition, and example
What is compliance with the law?
Compliance with the law refers to a contractual obligation where a party agrees to adhere to all applicable laws, regulations, and legal requirements in connection with their performance under the agreement. This clause ensures that all actions taken under the contract comply with the relevant legal framework, reducing risks of violations or liabilities.
Why is compliance with the law important?
Compliance with the law is important because it protects both parties from potential legal disputes, fines, or penalties arising from unlawful actions. For businesses, including this clause ensures accountability and mitigates the risk of one party’s non-compliance affecting the other party.
By clearly outlining the requirement for legal compliance, this clause promotes transparency, fosters trust, and ensures that the agreement aligns with applicable laws and regulations.
Understanding compliance with the law through an example
Imagine a supplier agreement for the delivery of goods. The contract includes a compliance with the law clause requiring the supplier to ensure that all goods meet regulatory standards, such as safety certifications and labeling requirements. This ensures the buyer is not exposed to liability if the goods fail to comply with laws.
In another example, a construction contract includes a compliance with the law clause obligating the contractor to adhere to building codes, zoning laws, and environmental regulations during the project. If the contractor fails to comply, they could be held liable for any resulting fines or project delays.
An example of a compliance with the law clause
Here’s how a compliance with the law clause might appear in a contract:
“Each Party agrees to comply with all applicable federal, state, local, and international laws, regulations, and ordinances in the performance of their obligations under this Agreement. Any breach of this obligation shall constitute a material breach of the Agreement.”
Conclusion
A compliance with the law clause ensures that all parties to an agreement operate within the boundaries of applicable laws and regulations. For businesses, it protects against legal risks, ensures accountability, and fosters a responsible and transparent relationship. Including this provision in contracts is essential for minimizing liability and ensuring that both parties understand their obligations to comply with legal requirements.
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.