No unlawful payments: Overview, definition, and example
What does no unlawful payments mean?
No unlawful payments refers to a clause commonly included in contracts or agreements that prohibits the parties from making or receiving payments that are illegal or violate any applicable laws or regulations. This can include payments related to bribery, corruption, fraud, or any other type of illicit transaction. The purpose of this provision is to ensure that all payments made during the course of the agreement comply with legal and ethical standards, protecting both parties from legal liability and maintaining the integrity of the contract.
This clause is particularly important in industries where there is a high risk of illegal transactions, such as international trade, government contracting, or finance. It helps both parties maintain compliance with anti-corruption laws, such as the Foreign Corrupt Practices Act (FCPA) in the U.S. or the UK Bribery Act.
Why is no unlawful payments important?
The no unlawful payments provision is important because it ensures that the parties involved in the contract adhere to legal and ethical standards, preventing potential legal violations and reputational damage. It protects both parties from the risk of being implicated in illegal activities, such as bribery or money laundering, which can lead to severe legal consequences, including fines, penalties, or criminal charges.
For businesses, complying with this provision helps avoid legal complications, ensures compliance with anti-corruption laws, and protects the company’s reputation. For individuals or entities entering into agreements, it provides assurance that all financial transactions are legitimate, transparent, and lawful.
Understanding no unlawful payments through an example
Imagine a company entering into a contract with a supplier to provide raw materials for a manufacturing project. The contract includes a no unlawful payments clause, specifying that neither the company nor the supplier can offer bribes, kickbacks, or any other illicit payments to government officials or other third parties involved in the procurement process. This ensures that both parties adhere to anti-bribery laws and that all transactions are above board.
In another example, a financial services firm has a policy of ensuring no unlawful payments in its business dealings. This includes conducting due diligence on clients and ensuring that all transactions, such as payments made to overseas accounts, comply with international anti-money laundering regulations. This provision protects the firm from engaging in fraudulent activities and ensures that all financial dealings are transparent and compliant with the law.
An example of a no unlawful payments clause
Here’s how a no unlawful payments clause might appear in a contract:
“The Parties agree that no unlawful payments, including but not limited to bribery, kickbacks, or illegal financial incentives, will be made or accepted in connection with this Agreement. Both Parties shall comply with all applicable anti-corruption and anti-money laundering laws, and shall take appropriate measures to ensure that no unlawful payments are made or received under this Agreement.”
Conclusion
The no unlawful payments clause is a critical safeguard that helps ensure all financial transactions within a contract are legal, ethical, and in compliance with applicable laws and regulations. It protects the parties from engaging in illicit practices, such as bribery or fraud, and helps maintain the integrity and reputation of the business. By including this clause, businesses and individuals can help avoid significant legal risks and ensure that all payments made under the contract are above board and transparent.
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.