Authorization no contravention: Overview, definition, and example
What is authorization no contravention?
Authorization no contravention is a legal term commonly used in contracts and agreements. It refers to a provision where a party confirms that they have obtained all necessary approvals, permissions, or authorizations required to perform their obligations under the contract, and that carrying out those obligations will not violate any laws, regulations, or existing agreements. Essentially, this clause ensures that the party is authorized to act as they have agreed and that their actions will not infringe upon any third-party rights or violate any legal constraints.
In business transactions, this provision is typically included to ensure that a company or individual has the proper legal authority to enter into the contract and that their performance under the contract will not lead to any legal conflicts or violations of existing rules.
Why is authorization no contravention important?
Authorization no contravention is important because it ensures that the party entering into the agreement has the legal right and necessary approvals to do so. It also ensures that performing the contract will not lead to legal or regulatory conflicts that could invalidate the agreement or create liabilities for the parties involved.
This clause is especially important in complex business transactions like mergers, acquisitions, or financing agreements, where regulatory approvals or consents from third parties might be required. It provides both parties with assurances that the contract is legally sound and that the obligations will not lead to violations or contravention of other existing agreements.
Understanding authorization no contravention through an example
Imagine a company, Company A, is acquiring another company, Company B. The agreement between the two includes an authorization no contravention clause, which specifies that Company A has obtained all necessary corporate approvals to proceed with the acquisition. Additionally, it confirms that the acquisition does not violate any existing contractual obligations or laws.
For example, if Company A had a prior agreement with a supplier that prohibits acquisitions without consent, the authorization no contravention clause ensures that Company A is not breaching that agreement by proceeding with the acquisition.
In another example, a business enters into a licensing agreement with a software provider. The authorization no contravention clause confirms that the business has the legal authority to enter into the contract and that its actions will not conflict with any prior licensing agreements or intellectual property laws.
An example of authorization no contravention clause
Here’s how an authorization no contravention clause might appear in a contract:
“The Party represents and warrants that it has obtained all necessary authorizations, approvals, and consents required to enter into and perform this Agreement. The execution and performance of this Agreement will not contravene, violate, or conflict with any laws, regulations, or any other agreements to which the Party is a party.”
Conclusion
The authorization no contravention clause is a key provision in contracts that ensures a party has the legal authority to enter into and perform the terms of the agreement, and that doing so will not violate any legal obligations or existing contracts. It provides security and clarity to both parties by confirming that the agreement is legally valid and will not result in unintended legal conflicts. This clause is crucial in safeguarding against potential disputes and ensuring the smooth execution of business transactions.
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.