Regulatory references: Overview, definition, and example
What are regulatory references?
Regulatory references refer to specific laws, rules, or government regulations cited in a contract to ensure compliance with legal requirements. These references help define standards, obligations, and procedures that parties must follow under the agreement. They are commonly found in finance, healthcare, employment, and environmental contracts to align with industry regulations.
For example, a banking agreement may include a regulatory reference to the Dodd-Frank Act, ensuring that financial transactions comply with federal laws governing banking and securities.
Why are regulatory references important?
Regulatory references are important because they ensure that contracts remain legally compliant and enforceable. By incorporating specific laws and regulations, businesses can protect themselves from legal risks, penalties, or contract disputes.
For businesses, including regulatory references in contracts provides clarity on legal obligations, ensures compliance with evolving laws, and helps avoid misinterpretations. These references are particularly relevant in contracts involving highly regulated industries, such as healthcare, finance, and corporate governance.
Understanding regulatory references through an example
A pharmaceutical company enters into a supply agreement for medical devices. The contract includes a regulatory reference to FDA regulations, ensuring that all products comply with U.S. Food and Drug Administration (FDA) safety and quality standards. If the regulations change, both parties must adjust their compliance practices accordingly.
In another case, a construction company signs a contract for a major infrastructure project. The agreement includes regulatory references to environmental protection laws, requiring the company to follow specific waste disposal and emissions guidelines during construction.
Example of a regulatory references clause
Here’s how a regulatory references clause might appear in a contract:
“All obligations under this Agreement shall be performed in compliance with applicable laws and regulations, including but not limited to [specific statute or regulation]. In the event of changes to the referenced regulations, the Parties agree to amend the Agreement as necessary to maintain compliance.”
Conclusion
Regulatory references ensure that contracts align with current laws and industry regulations, reducing legal risks and ensuring compliance. By incorporating specific laws into agreements, businesses and individuals can establish clear obligations, protect against liabilities, and adapt to regulatory changes. A well-drafted regulatory references clause helps ensure transparency and legal certainty in contracts across various industries.
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.