Why should companies have compliance terms and conditions in third-party contracts? It is a specification in the Justice Department Evaluation of Corporate Compliance Programs, stating in Prong 10, What mechanisms have existed to ensure that the contract terms specifically described the services to be performed, that the payment terms are appropriate, that the described contractual work is performed, and that compensation is commensurate with the services rendered?
Companies should make it a practice to incorporate compliance terms and conditions into all third-party contracts and have appropriate compliance terms and conditions in these contracts. These can be used as a starting point for negotiations. The advantages of such a template are several, including: (1) the contract language is tested against real events; (2) the contract language assists the company in managing its compliance risks; (3) the contract language fits into a series of related contracts; (4) the contract language is straightforward to administer, and (5) the contract language helps to manage the expectations of both contracting parties regarding anti-bribery and anti-corruption.
What are the compliance terms and conditions that should be included in commercial contracts with third parties? At a minimum it should contain payment terms which comply with the FCPA, audit rights, requirements for accurate books and records, annual training, and anti-corruption certifications.
Such compliance terms and conditions should be stated directly in the contract no matter if the contract is a simple agency or consulting agreement or a joint venture with several formation documents. The compliance terms and conditions should include representations that in all undertakings the third party will make no payments of money, or anything of value, nor will such be offered, promised or paid, directly or indirectly, to any foreign officials, political parties, party officials, and candidates for public or political party office, to influence the acts of such officials, political parties, party officials, or candidates in their official capacity, to induce them to use their influence with a government to obtain or retain business, or gain an improper advantage in connection with any business venture or contract in which the company is a participant.
Following these simple contract rules with help companies avoid a collision down the road.