What must a contract include or forbid to make sure it follows laws that stop companies from paying bribes?

To ensure a contract follows laws that stop companies from paying bribes, it must include specific provisions that prohibit such actions and establish mechanisms for compliance and enforcement. Primarily, the contract must contain a clear anti-bribery covenant, which is a formal promise where each party explicitly agrees not to, directly or indirectly, offer, promise, give, or authorize anything of value to any government official or private person with the intent to improperly influence a decision, obtain or retain business, or secure any improper advantage. This covenant also requires parties to comply with all applicable anti-bribery and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. This directly forbids engaging in any form of bribery or corrupt payment.

Relatedly, the contract should include representations and warranties, which are statements of fact made by one party that the other can rely upon. Here, each party represents and warrants that neither it nor its employees, agents, or subcontractors have violated or will violate anti-bribery laws, nor have they made or will they make any unlawful payments, offers, or promises. This assures that the parties enter the agreement with a clean record and a commitment to uphold anti-bribery standards throughout the contract's duration.

The contract must grant audit rights, allowing the company to review the other party's books, records, and relevant financial transactions to verify compliance with the anti-bribery provisions. For example, a company hiring an overseas consultant might reserve the right to audit the consultant's expense reports to ensure funds were not used for illicit payments. This ability to scrutinize financial dealings helps to deter and detect forbidden activities.

Crucially, the contract must specify termination rights, giving the company the ability to immediately end the agreement if the other party breaches any anti-bribery provisions. This provides a powerful incentive for compliance and allows the company to quickly sever ties with a non-compliant partner, thereby mitigating its own potential liability. For instance, if a distributor is found to have bribed a foreign official to secure a contract, the manufacturer can terminate their agreement without penalty.

Furthermore, the contract should include an indemnification clause, which obligates the party that breaches the anti-bribery provisions to compensate the other party for any losses, fines, penalties, or legal costs incurred as a result of that breach. This transfers the financial risk of non-compliance to the responsible party.

Finally, the contract must ensure that these anti-bribery obligations extend down the chain through subcontracting and assignment clauses. These clauses require that any subcontractors, agents, or other third parties engaged by the contracting party also adhere to the same anti-bribery standards and contractual commitments, preventing the circumvention of these rules through intermediaries. The contract should also explicitly forbid the use of contract funds for any unlawful purpose or for creating inaccurate books and records that could conceal improper payments, aligning with anti-bribery laws' accounting provisions.