Absence of conflicts: Overview, definition, and example
What is absence of conflicts?
Absence of conflicts is a contractual representation where a party confirms that entering into or performing the agreement will not create conflicts with existing obligations, laws, or contracts. This ensures that the party has the legal and contractual capacity to fulfill the agreement without violating other commitments.
For example, a business signing a partnership agreement may be required to confirm that the new arrangement does not conflict with any existing contracts, such as exclusive distribution agreements.
Why is absence of conflicts important?
An absence of conflicts clause is important because it protects all parties in a contract by ensuring that no existing agreements, laws, or obligations will interfere with the performance of the new agreement. This reduces the risk of legal disputes, breaches, or unenforceability.
For businesses, this clause is particularly relevant in mergers, acquisitions, and financing agreements, where a party’s existing commitments must be clear to avoid conflicts with lenders, investors, or regulators. It is also crucial in employment contracts to prevent employees from violating non-compete agreements or confidentiality obligations.
Understanding absence of conflicts through an example
Imagine a software company signs a licensing agreement to distribute a new software product. The contract includes an absence of conflicts clause requiring the company to confirm that no other agreements prevent it from granting distribution rights. This protects the distributor from potential legal issues if the company had already granted exclusive rights to another party.
In another example, a business executive joins a new company and signs an employment contract. The agreement contains an absence of conflicts clause confirming that the executive is not bound by any non-compete or confidentiality agreements from their previous employer that would prevent them from fulfilling their new role.
An example of an absence of conflicts clause
Here’s how an absence of conflicts clause might appear in a contract:
“The Party represents and warrants that entering into and performing this Agreement does not and will not conflict with, violate, or breach any other contract, obligation, or legal requirement to which it is subject.”
Conclusion
An absence of conflicts provision ensures that a party can legally and contractually fulfill its obligations under an agreement without violating prior commitments. It helps prevent disputes, protects all parties involved, and is essential in transactions involving partnerships, employment, financing, and business agreements. Before signing a contract, businesses and individuals should carefully review their existing obligations to confirm there are no conflicts.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.