Consents and approvals: Overview, definition, and example
What are consents and approvals?
Consents and approvals refer to the formal permissions or agreements required from one or more parties before certain actions can be taken under a contract or legal arrangement. These may include authorizations from regulatory bodies, business partners, landlords, or shareholders, depending on the nature of the transaction.
For example, a tenant might need to obtain the landlord’s consent before making structural changes to a leased property.
Why are consents and approvals important?
Consents and approvals are important because they ensure that all relevant parties agree to or are aware of significant actions or decisions. This protects the interests of those affected by the decision, reduces the risk of disputes, and ensures compliance with contractual or legal requirements.
For businesses, obtaining proper consents and approvals is critical to maintaining good relationships with stakeholders and avoiding potential legal or financial liabilities.
Understanding consents and approvals through an example
Imagine a company wants to assign its rights under a service contract to a third party. The contract includes a clause requiring the other party’s consent before any assignment. The company must formally request and receive approval to proceed, ensuring that the assignment does not violate the agreement.
In another example, a company acquiring real estate may need to obtain government approvals to comply with zoning laws or environmental regulations before finalizing the purchase. Failure to secure these approvals could delay or void the transaction.
An example of a consents and approvals clause
Here’s how a consents and approvals clause might appear in a contract:
“No Party shall assign its rights or delegate its obligations under this Agreement without the prior written consent of the other Party. All required consents and approvals shall be obtained in writing and shall not be unreasonably withheld or delayed.”
Conclusion
Consents and approvals ensure that actions taken under an agreement are authorized and transparent, protecting the interests of all parties involved. They reduce the risk of disputes and help maintain compliance with contractual and legal obligations.
By including clear consents and approvals clauses, businesses can ensure that their agreements are structured to require necessary permissions, fostering trust and reducing legal risks.
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.