Compliance Clause template clause

    Updated: 25 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] - Compliance

    1. Each Party undertakes to comply with all applicable laws and regulations in the performance of this Agreement, including but not limited to anti-bribery and anti-corruption laws, applicable economic sanctions regimes, and anti-money laundering legislation.

    2. Each Party represents and warrants that it, its directors, employees, and any third parties engaged by it:
    (a) have not made, offered, or promised any bribes, kickbacks, or other improper payments to any person;
    (b) do not appear on any sanctions list maintained by the European Union, the United Nations, the Office of Foreign Assets Control (OFAC), or any other relevant authority;
    (c) are not engaged in any activities that constitute money laundering, terrorist financing, or fraud.

    3. If a Party becomes aware of an actual or suspected breach of this Article, it shall notify the other Party in writing without delay. The notification shall describe the (suspected) breach and the corrective measures taken or proposed.

    4. A breach of this Article by a Party shall constitute a material breach entitling the other Party to terminate this Agreement with immediate effect, without prejudice to the right to claim damages.

    5. Each Party shall cooperate with the other Party in compliance audits relating to the obligations under this Article, provided that the request is reasonable and audits are conducted no more than [number, e.g. once] per year.

    What does this clause mean?

    A compliance clause requires both parties to adhere to applicable laws and regulations, with emphasis on anti-corruption, sanctions, and anti-money laundering. The clause is not a formality: if your contracting partner becomes involved in fraud or sanctions violations, you as the client may also face liability or reputational damage.

    Paragraph 2 contains representations and warranties. By including these guarantees, you place the responsibility explicitly with the contracting party. If a guarantee later proves to have been false, you have a direct basis for termination and damages. Research by Loio (2026) shows that 71% of all contracts are never monitored for compliance after signing. A compliance clause with an audit right (paragraph 5) gives you the ability to verify periodically.

    The reporting obligation in paragraph 3 is deliberately broad: even suspicions must be reported. Early detection limits damage and enables you to meet your own statutory reporting obligations in time.

    When should you use this clause?

    Include a compliance clause in agreements with suppliers, subcontractors, distributors, and trading partners, particularly in cross-border transactions, government contracts, and sectors with elevated integrity risk (construction, financial services, defence, healthcare).

    The need is growing: the EU Corporate Sustainability Due Diligence Directive (CSDDD) requires larger companies to monitor their value chains for human rights and environmental standards. That obligation trickles down to SMEs through procurement chains. According to World Commerce & Contracting, 9.2% of annual revenue is lost due to poor contract management, and non-compliance risk is a growing component. Record compliance obligations in your contract register and schedule periodic review moments.

    Customize these elements

    • 1Tailor the list of applicable laws and regulations to your industry. In healthcare, sector-specific regulations apply; in financial services, additional regulatory frameworks are relevant
    • 2Consider including a due-diligence obligation if you work with suppliers in countries with a high corruption risk (Transparency International CPI)
    • 3Add sustainability and human rights standards if your organisation falls under the CSDDD or is affected through a client's supply chain
    • 4Adjust the audit frequency to the risk profile: annually for standard suppliers, semi-annually for high-risk relationships

    Sources

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