Your knowledge of the law is irrelevant to your liability.
As most laws are mandatory (you have to comply) why do we need to mention laws, regulations and other statutory requirements in our contracts?
There are 3 good reasons.
Although ‘ignorance is no defence’, contracts are tools to help the parties to understand their obligations.
If the express requirements of relevant laws are not included, then we assume that the parties know the law. Not everyone using or operating a contract is fully aware of the myriad laws which affect their conduct and their project.
If we want the parties to be clear what their obligations are, then we need our contracts to be clear too.
When drafting my 500-Word Contract™ one of the testers didn’t agree with the proposition that ‘you can leave out certain terms because the law is as it is and doesn’t need to be set out in the contract’. My approach is comparable to RIBA’s in its Letter Contracts.
RIBA’s Guide to Letter Contracts* states: “Because the client [and the architect] must comply with the law, it is not essential to define the obligations that arise from compliance with statutory requirements, except where choices have to be made, e.g for particular dispute resolution procedures.”
Is it right to assume, as RIBA has, that the architect (whose job it is to know the law) and a consumer client (including a one-time employer) know their obligations under the law?
Of course in a short contract the options are limited. The User Guide to my 500-Word Contract specifically asks the parties to seek advice if they are unsure. It relies on the parties to be proactive.
The quote above also mentions choices, my 2nd reason.
Some laws, rules or regulations are optional in the sense that you can agree to opt out. But you can’t do this by simply refusing to comply. You have to clearly show that you are aware of the discretionary provisions and choosing not to adopt them.
Some examples might help. The implied terms from the Sale of Goods Act 1979 on quality, fitness for purpose and description can be excluded by express terms dealing with these issues. The procedural requirements in the Scheme for Construction Contracts for adjudication can be excluded by adopting a compliant procedure. The implied rights of third parties to enforce terms of a contract under The Contracts (Rights of Third Parties) Act 1999 can be excluded.
The most commonly-cited reason to include laws within a contract is to provide extra remedies.
If you breach a law, the Crown can bring a case against you. When legal compliance is also a contractual obligation, the other party can bring claims for breach of contract and/or indemnity. A common example for construction projects is an employer indemnity for claims arising from nuisance or trespass – the landowner is liable but the contractor is responsible for the acts or omissions causing the offence.
What do you think: Should laws be express or should we rely on the professionalism of the industry and its clients?
Source: RIBA: A Guide to Letter Contracts for Very Small Projects (3rd edition, 2012). Available from Bliss Books.