No litigation pending: Overview, definition, and example
What is "no litigation pending"?
The term "no litigation pending" refers to a statement or clause in a contract or agreement that confirms that, at the time of signing, there are no ongoing lawsuits, legal disputes, or other forms of legal action against the party. This clause is often included to reassure the other party that the party making the statement is not involved in any legal proceedings that could affect their ability to perform under the contract or agreement.
In simpler terms, "no litigation pending" means that the party is not currently involved in any lawsuits or legal actions.
Why is "no litigation pending" important?
The "no litigation pending" clause is important because it provides assurance that the party entering into the agreement is not facing any legal issues that could interfere with fulfilling their obligations. For businesses or individuals, being involved in litigation can affect financial stability, operations, and reputation. This clause helps to minimize risk by ensuring that the party is not already entangled in legal disputes that could potentially disrupt the agreement or cause complications in the future.
It also helps protect the other party from unforeseen legal liabilities or delays that could arise if there were active litigation pending.
Understanding "no litigation pending" through an example
Imagine a company entering into a contract with a supplier to purchase raw materials. The supplier includes a "no litigation pending" clause in the contract to ensure that the company is not involved in any lawsuits that could affect its ability to fulfill the terms of the contract. If the company were to disclose that there is active litigation, the supplier may reconsider the contract, or may require additional assurances or guarantees to proceed with the agreement.
In another example, a business owner selling their company may include a "no litigation pending" clause in the sale agreement to reassure the buyer that there are no legal disputes or lawsuits that could affect the value of the company or future operations. If the seller were involved in pending litigation, it could potentially affect the buyer’s decision to purchase the business or the terms of the deal.
Example of a "no litigation pending" clause
Here’s how a "no litigation pending" clause might appear in a contract:
"The Seller represents and warrants that, as of the date of this Agreement, there is no litigation, claim, or legal action pending or threatened against the Seller that could materially affect the Seller’s ability to perform its obligations under this Agreement. The Seller agrees to promptly notify the Buyer if any litigation or legal action arises during the term of this Agreement."
Conclusion
The "no litigation pending" clause is a valuable tool for ensuring that both parties entering into an agreement are not exposed to unnecessary risks or complications from ongoing legal disputes. It helps provide clarity and security, making it clear that one party is free from legal entanglements that could affect the execution of the contract.
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.