Intervening law: Overview, definition, and example
What is intervening law?
Intervening law refers to a change or development in the law that occurs after a contract or agreement has been made, which affects the rights, obligations, or performance of the parties involved. Essentially, it refers to laws or regulations that were not in place at the time of the agreement but later come into effect and impact how the agreement is enforced or carried out.
Intervening law can occur due to changes in statutory law (laws passed by legislative bodies), judicial decisions (new rulings or precedents set by courts), or regulations enacted by government agencies. When intervening law occurs, it may either require parties to adjust their behavior to comply with the new law or, in some cases, provide grounds for modifying or even terminating certain agreements.
Why is intervening law important?
Intervening law is important because it highlights the need for flexibility in contracts and business operations. Laws change over time, and when they do, they can have significant effects on previously established agreements. This is especially critical in industries that are highly regulated, like finance, healthcare, or environmental sectors.
Understanding how intervening law affects existing agreements helps businesses and individuals navigate legal changes, mitigate risks, and take action when necessary. It may also impact the enforceability of certain clauses, such as performance requirements or penalty clauses, if the law changes in ways that make compliance impossible or unreasonable.
Understanding intervening law through an example
Imagine a company signs a contract to build a new building, agreeing to meet certain construction standards set by the local government. Midway through the project, the local government enacts a new building code that requires additional safety measures that were not included in the original contract. This is an example of intervening law, as the change in the law impacts the company’s obligations under the contract.
In another example, a company enters into an agreement with a supplier to import goods from another country. After the contract is signed, a new international trade regulation is enacted that imposes tariffs or bans on certain imports. The supplier may now face challenges fulfilling the contract, and the buyer might need to renegotiate terms due to the intervening law.
Example of an intervening law clause
Here’s how an intervening law clause might appear in a contract:
“In the event that any change in applicable laws, regulations, or governmental policies occurs after the execution of this Agreement and such change affects the performance of the obligations of either Party, the Parties agree to meet and negotiate in good faith to amend the Agreement as necessary to comply with the new legal requirements.”
Conclusion
Intervening law is an essential concept for understanding how changes in the legal landscape can impact existing agreements. Whether due to new legislation, court decisions, or regulatory changes, intervening law ensures that contracts remain adaptable to legal shifts that may occur after the contract is signed.
By being aware of the potential effects of intervening law, businesses and individuals can take proactive steps to manage risks, adapt to legal changes, and maintain the integrity of their agreements. It’s important to consider the possibility of intervening law when drafting contracts, as well as having provisions in place to address legal changes that could affect performance or obligations.
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.