Ignorance is No Defence

Your knowledge of the law is irrelevant to your liability.

Given that you have to comply (whatever your contract or conscience says), why do most contracts require the parties to comply with statutory requirements?

Clarity

Although ‘ignorance is no defence’, contracts are tools to help the parties to understand their obligations.

If you don’t write is into your contract, you are assuming the parties know the law.

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?

Do they? If we want the parties to be clear what their duties and obligations are, then we should write it into our contracts.

Optional laws?

Some laws are optional in the sense that you can either state that you are opting out, or include alternative wording which satisfies the spirit of the legislation. 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.

For example:

  • The implied terms in B2B contracts in 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 by stating so.

Extra remedies

The most commonly-cited reason to include laws as a contractual duty (as well as a duty to the Crown/state) is to provide extra remedies if one party is in breach.

If you breach a law, the Crown/state 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 should you do?

1) Know the laws that apply to your contracts [read more]

2) Decide whether you are happy to rely on the professionalism of the industry and its clients (eg using my 500-word contract) or you want to add relevant duties into your contract.

Source: RIBA: A Guide to Letter Contracts for Very Small Projects (3rd edition, 2012).  See also my Guide to Construction Statutes on slideshare.

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