Laws to be observed: Overview, definition, and example
What are laws to be observed?
"Laws to be observed" refers to the specific legal regulations, rules, and statutes that parties in a contract must follow during the performance of their obligations. This clause ensures that all activities carried out under the agreement are in compliance with applicable laws. It highlights the responsibility of each party to adhere to local, national, or international laws relevant to the contract.
For example, if a business is entering into a contract for the sale of goods in another country, the "laws to be observed" clause ensures that the business will comply with the trade laws and regulations of that country.
Why are laws to be observed important?
This clause is important because it protects both parties by ensuring that the contract is executed legally. Without it, one party may inadvertently break the law, potentially leading to penalties, fines, or even the invalidation of the contract. It also ensures that the contract remains enforceable, as contracts that violate laws may be deemed void.
For businesses operating across different jurisdictions, this clause is essential for ensuring compliance with a variety of laws—whether they're related to environmental standards, intellectual property, or employment regulations.
Understanding laws to be observed through an example
Imagine a company based in Germany entering into a contract with a supplier in Brazil for the purchase of electronic parts. The contract includes a "laws to be observed" clause that specifies both parties must comply with the relevant import/export laws, tax regulations, and product safety standards of both Germany and Brazil. This clause ensures that all actions taken under the contract will align with the legal requirements of both countries.
In another example, a software company in the U.S. signs a contract with a European client to deliver software solutions. The "laws to be observed" clause in the contract may require the U.S. company to comply with the European Union's data protection laws, such as the GDPR, when processing the client's data.
An example of a laws to be observed clause
Here’s how a "laws to be observed" clause might look in a contract:
"The parties agree that all activities conducted under this Agreement shall comply with all applicable laws, regulations, and ordinances of the jurisdiction(s) in which the services are performed or goods are delivered."
Conclusion
"Laws to be observed" ensures that all actions under a contract are legally compliant. It protects the parties from legal issues and ensures that the agreement is enforceable. By including this clause, businesses can avoid legal troubles and operate within the boundaries of the law, making it an essential part of any contract.
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.