The regulatory-out clause, also known as a FERC-out clause, is a provision in a contract pertaining to the sale of natural gas. It stipulates that if a government agency prohibits the passing on of the price paid to the producer to consumers, the contract price will be reduced or the contract will be terminated.
A regulatory-out clause, also referred to as a FERC-out clause in the oil and gas industry, is a contractual provision that enables the termination of a contract or reduction in price if a regulatory agency prohibits the passing on of the price paid to the producer to consumers. For instance, if a natural gas producer agrees to sell their gas at a specific price, but a regulatory agency determines that consumers cannot bear the cost, the regulatory-out clause allows for the contract to be terminated or the price to be adjusted accordingly. This clause is crucial for both the producer and the buyer as it serves as a safeguard against unexpected regulatory changes that could impact the profitability of the contract.
A regulatory-out clause is a provision in a contract that allows one or both parties to terminate the agreement if there is a change in the applicable laws or regulations that significantly impacts the parties’ ability to perform their obligations under the contract.
A regulatory-out clause should be included in a contract when there is a possibility of changes in laws or regulations that could affect the parties’ ability to fulfill their contractual obligations. It provides a safeguard for both parties in case unforeseen regulatory changes occur.
Typically, a regulatory-out clause is only invoked if the change in laws or regulations has a significant impact on the contract. However, the specific language of the clause and the interpretation of the courts may vary, so it is important to consult with a legal professional to determine the applicability in each situation.
No, a regulatory-out clause is specifically designed to address changes in laws or regulations imposed by governmental authorities. Changes in industry standards or best practices are generally not covered by a regulatory-out clause.
Yes, like any other contractual provision, a regulatory-out clause can be waived or modified by mutual agreement between the parties. It is important to carefully review and negotiate the terms of the clause to ensure it aligns with the parties’ intentions and expectations.
If a regulatory-out clause is invoked, it typically allows one or both parties to terminate the contract without incurring any liability for breach. The specific consequences and procedures for termination may be outlined in the contract itself or may need to be determined through negotiation or legal proceedings.
Yes, a regulatory-out clause can be challenged in court if there is a dispute regarding its applicability or interpretation. The court will consider the language of the clause, the intent of the parties, and any relevant legal principles to determine its enforceability.
While regulatory-out clauses are generally enforceable, there may be limitations imposed by specific laws or regulations in certain jurisdictions. It is important to consult with a legal professional to ensure compliance with applicable laws and regulations.
Yes, a regulatory-out clause can be included in various types of contracts, such as commercial agreements, employment contracts, or lease agreements. Its inclusion depends on the specific circumstances and the potential impact of regulatory changes on the parties’ obligations.
Yes, if a regulatory-out clause is properly invoked and the contract is terminated due to changes in laws or regulations, it can serve as a valid defence against a claim for breach of contract. However, the specific facts and circumstances of each case will determine the outcome, so it is advisable to seek legal advice in such situations.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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