Approval: Overview, definition and example
What is approval?
Approval refers to the formal consent or agreement given by one party in a contract, typically for actions, decisions, or documents that require validation by another party before proceeding. This process ensures that any major decisions or changes made are reviewed and agreed upon according to the terms set out in the contract.
Why is approval important?
Approval is important because it provides control over certain actions, ensuring that they align with expectations, standards, or requirements. For instance, if a company is working with a supplier, the supplier may need the company’s approval before making any changes to product specifications or delivery schedules. This step ensures both parties are in agreement before proceeding with any significant actions or decisions.
For businesses, approval clauses help to protect interests by ensuring key decisions are evaluated and validated by the right individuals. It adds a layer of control and avoids the risks of unapproved changes or actions that could negatively affect the agreement.
Understanding approval through an example
Imagine a software development company working on a project for a client. The client has the right to approve certain deliverables, such as a software prototype, before the development team proceeds with the next phase. If the client doesn’t approve the prototype, the company must revise it based on feedback before moving forward. This ensures the final product meets the client’s specifications.
In another case, a contractor may need the property owner’s approval before beginning major renovations. The approval clause ensures the owner is involved in key decisions and that the contractor works within agreed parameters.
An example of an approval clause
"The Contractor shall submit the final project design to the Client for approval. The Client must provide written approval or feedback within 10 business days of receipt. If no response is received within this period, the design will be considered approved by default."
Conclusion
Approval clauses are essential in contracts, providing clarity on decision-making processes and ensuring that both parties are aligned on key matters. They help manage risks by requiring that significant actions are reviewed and accepted by the relevant parties before they are carried out, ensuring the contract is fulfilled according to the agreed terms.
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.