Covenant Not to Sue Template

In plain language: Identifies the covenantor and covenantee by full legal name and entity type, and briefly describes the background dispute or circumstance giving rise to the covenant.

Common mistake: Using trade names or abbreviated names instead of the registered legal entity names. If the covenantor's name does not match the party on the underlying claim, the covenant may fail to bind the correct legal person.

In plain language: The core operative clause — the covenantor's express, binding promise not to file or pursue the specified legal claims against the covenantee.

Common mistake: Defining the covered claims too broadly — sweeping in unrelated future claims the covenantor did not intend to waive. Courts may interpret an overbroad scope as a full release, destroying the document's strategic purpose.

In plain language: States what the covenantee pays or provides in exchange for the promise, making the covenant a binding contract rather than a revocable gratuitous promise.

Common mistake: Reciting 'nominal consideration of $1' without reflecting actual payment. Courts in some jurisdictions have found nominal consideration inadequate to support a covenant not to sue, particularly when the claim being covenanted is substantial.

In plain language: Expressly lists any claims, parties, or matters excluded from the covenant's scope that the covenantor retains the right to pursue.

Common mistake: Omitting the reserved rights clause entirely. Without it, a covenantee or court may argue the covenant implicitly covers all claims between the parties, eliminating the strategic advantage of using a covenant rather than a full release.

In plain language: Requires the covenantor to indemnify and hold harmless the covenantee against any losses, legal fees, or damages incurred if the covenantor violates the promise not to sue.

Common mistake: Limiting indemnification to direct damages only. Attorneys' fees and defense costs — often the largest exposure in a breach — must be explicitly included or they may not be recoverable.

In plain language: Each party confirms it has the authority and capacity to enter the covenant, has not previously assigned the covered claims to a third party, and is not aware of any competing rights.

Common mistake: Omitting the no-assignment representation. If the covenantor previously assigned the covered claim to a litigation funder or attorney under a contingency fee arrangement, the covenant may not bind the actual claim holder.

In plain language: Confirms that entering the covenant does not constitute an admission of fault, liability, or wrongdoing by either party.

Common mistake: Omitting this clause in commercial settings. Without it, the covenant itself can be introduced as evidence of implied liability in related proceedings involving third parties.

In plain language: Addresses how the covenant interacts with claims against other defendants in multi-party disputes, specifying whether the covenantee receives a pro tanto credit or whether the covenantor's claim against others is preserved in full.

Common mistake: Ignoring jurisdiction-specific joint tortfeasor rules. Several US states apply a proportionate-fault credit rather than a pro tanto credit — using the wrong formula can expose the remaining defendants to a windfall or leave the covenantor under-compensated.

In plain language: States which jurisdiction's law governs the covenant's interpretation and enforcement, and how any dispute about the covenant itself is resolved — arbitration, mediation, or court.

Common mistake: Choosing a governing law that has no connection to where the covered events occurred or where the parties operate. Courts may decline to enforce a choice-of-law clause that appears designed to evade mandatory local protections.

In plain language: Confirms the covenant is the entire agreement on the covered subject, superseding prior discussions, and states how it can be amended and whether electronic or multiple-copy execution is valid.

Common mistake: Omitting the integration clause when prior correspondence included broader promises of settlement. Without it, emails or letters suggesting a full release could be admitted to expand the covenant's scope beyond what was intended.

A covenant not to sue is a binding contractual promise by one party not to initiate or continue a specified legal action against another party. Unlike a release of liability, it does not extinguish the underlying legal right — the covenantor still technically holds the claim but has contractually agreed not to assert it. This distinction matters most in multi-defendant disputes where the covenantor wants to settle with one party while preserving claims against others.

A release of liability permanently extinguishes the underlying legal claim — once signed, the releasing party has no right to sue, period. A covenant not to sue preserves the underlying right but creates a contractual obligation not to exercise it. Practically, both bar the same lawsuit, but a covenant allows the covenantor to maintain claims against joint tortfeasors without those parties arguing the entire dispute was resolved. Courts in some jurisdictions treat the two documents as functionally equivalent; in others the distinction is legally significant.

Use a covenant not to sue when you want to resolve a claim against one specific party without releasing co-defendants or settling every dispute simultaneously. Settlement agreements typically include mutual releases that extinguish all claims between the parties. A covenant is the right tool when the dispute is ongoing in a multi-party context, when the covenantor needs to preserve rights for strategic or insurance reasons, or when the parties want to avoid the finality of a full release.

Yes, a properly executed covenant not to sue is generally enforceable as a contract in most jurisdictions, provided it includes adequate consideration, clear identification of the covered claims, and is signed by parties with authority to bind themselves or their entities. Enforceability may be limited when the covenant covers claims that cannot be waived by contract — such as certain statutory employment or consumer rights — or when its scope is found to be unconscionable. Consider consulting a lawyer to confirm enforceability under the governing jurisdiction's specific rules.

A covenant can be written to cover future claims, but courts scrutinize prospective waivers carefully. Most covenants are limited to known claims arising from a defined event or time period. An overly broad future-claims covenant risks being struck down as unconscionable or against public policy — particularly in consumer, employment, and personal injury contexts where statutory protections may override contractual waivers. Limit future coverage to specific, identifiable categories of claims where the parties have fully assessed the risk.

In most jurisdictions, a properly drafted covenant not to sue does not release co-defendants — that is its primary advantage over a full release. However, many states apply a pro tanto or proportionate-fault credit rule, reducing the covenantor's potential recovery from remaining defendants by the amount received from the settling party. The specific credit mechanism depends on governing law, so the joint tortfeasor clause must reflect the applicable jurisdiction's rules to avoid unintended consequences.

In most commercial and civil contexts, notarization is not required for a covenant not to sue to be enforceable — the signatures of authorized parties with valid consideration are typically sufficient. Certain real estate or government-contract related covenants may require notarization or witnessing under local law. Electronic signatures are accepted in most jurisdictions under ESIGN, UETA (US), or equivalent statutes, though confirm this is acceptable for the specific claim type involved.

If the covenantor files suit in breach, the covenantee may raise the covenant as a complete defense and seek dismissal. If an indemnification clause was included, the covenantee can also seek reimbursement of all legal costs incurred defending the action. In some jurisdictions, the covenantee may pursue a separate breach-of-contract claim for damages caused by the wrongful filing. Without an indemnification clause, the covenantee must still absorb defense costs even while winning on the covenant defense.

For straightforward single-party commercial disputes with clear claim boundaries, a well-prepared template is a solid starting point. Legal review is strongly recommended when the covenant involves multiple defendants, significant monetary claims, complex IP or real estate rights, pending litigation, or parties in different jurisdictions. An attorney can confirm the scope of covered claims, ensure the document does not inadvertently function as a full release, and tailor the joint tortfeasor language to the applicable jurisdiction — typically a 1–2 hour engagement costing $300–$700.