Key Takeaways:

  • A covenant not to sue template is a legal document where one party agrees not to pursue legal action against another under specific conditions.
  • These agreements are often used in settlement contexts to avoid litigation and are different from general releases.
  • Common elements include identification of parties, scope of claims waived, consideration exchanged, and termination conditions.
  • Enforceability depends on state law, proper consideration, and clarity of terms.
  • Templates should be customized to match the unique facts of each situation and may include revocation clauses or survival clauses.

A covenant not to sue form is a contract in which a person or party agrees not to sue the person that has caused them damages. It can mean that:

  • The claimant cannot sue ever
  • The claimant cannot sue for a certain period of time

There can only be two parties in a covenant not to sue. Therefore, if a third party wishes to make a claim or sue, it has full rights to do so.

The reason two parties might enter into such a covenant is to settle legal issues without involving the courtroom. For example, one or both parties may wish to avoid a drawn out and costly lawsuit. 

Instead of letting the courts decide the outcome, the claimant might receive a predetermined sum as compensation for damages or a promise that the accused will perform a specific action.

Example of a Covenant Not to Sue

One example of a scenario that could involve a covenant not to sue is between a state government and a manufacturing firm.

Imagine that the state government has just discovered that the manufacturing firm is not properly disposing of hazardous waste products. One option for the state is to initiate a lawsuit to have the company pay a fine. However, since the agency's real goal is to force the company to clean up the mess and take measures to fix disposal procedures in the future, it would be better off considering a covenant not to sue instead.

The covenant not to sue would tell the company to clean up its processes. If it fails to do so, then the state would have the right to sue. 

Steps to Creating a Covenant Not to Sue

If you're interested in creating a covenant not to sue, there are a few options you can take. 

  1. Search for an example of an existing covenant to base yours off of. Using a template can help you draft your covenant so that it is professional and legally binding. You might also look at releases or non-exclusive license agreements depending on your exact situation.
  2. Gather information for your covenant, including documents related to your interests and documents about the other party. If you're already in a lawsuit involving the matter, make sure to include the case number, title, and other court documents. If your problem involves patents, you'll need the patient number, title, or trademark registration number.
  3. Format your covenant, so it resembles a traditional contract format. This means there should be an outline with numbered paragraphs. If no one has filed a lawsuit yet, generally one paragraph explaining the claim is good enough. Then, you'll just need to get the aggressor to promise not to file a lawsuit in the interim.
  4. Clearly identify everyone involved in the matter, including yourself and your aggressor. You can use pronouns if your covenant is just one page, but otherwise, always write out the names on longer documents. This means you'll need:
    • Full names
    • Legal business names
    • Street addresses
  5. Define the purpose of the covenant in a clear and easy-to-understand way. Keep everything factual and outline the entire series of events that led you to this point. You may also want to insert legal clauses, known as "whereas" clauses, as these will better explain what led to the agreement.
  6. Add a release statement that can end the covenant if you wish. A release lets the aggressor party off the hook for their indiscretions as long as you don't sue them. Releases usual also cover your employees or your insurance, which will prevent these parties from acting independently against the party.
  7. Specify your claims so that it's reasonably specified. You can't just demand that the other party never sues you for anything; instead, you'll need to clarify the exact incident in question. If there's a lawsuit involved, it's easy to pick out the claim, as it will be whatever the focus of the lawsuit is. Otherwise, you'll need to carefully consider the initial incident as well as any future claims that could come up.
  8. Outline the considerations so that each party knows what they are getting. For example, note down any sums of money that will be exchanged to keep the battle out of court. If a lawsuit was already in progress, specify the exact amount of money that's going toward the settlement. For covenants that cover multiple claims, specify how much money goes toward each incident.

Drafting Tips for Your Covenant Not to Sue Template

To ensure your covenant not to sue template is enforceable and tailored to your needs, consider the following tips:

  • Use Clear and Unambiguous Language: Avoid legalese that may confuse either party or lead to disputes later.
  • Be Specific About the Claims Waived: Include references to case numbers, dates, contracts, or incidents to narrow the scope.
  • Address Potential Future Claims: State whether future claims related to the same subject matter are also covered.
  • Define What Constitutes a Breach: Clarify what actions would invalidate the agreement and potentially reopen the right to sue.
  • Have It Reviewed by an Attorney: Even if using a free or online template, legal counsel can ensure the agreement is enforceable under applicable state law.

Sample Situations Where a Covenant Not to Sue Template Is Used

You may consider using a covenant not to sue template in the following scenarios:

  • Employment and Severance Agreements: Where an employer provides compensation in exchange for the employee agreeing not to sue.
  • Business Settlements: Between two companies that have a dispute over services, products, or intellectual property.
  • Construction Disputes: Where a contractor agrees to correct defects, and the client agrees not to sue as long as performance is adequate.
  • Product Liability: When a manufacturer settles a claim for defective products without admitting liability.
  • Patent or Trademark Conflicts: Common in intellectual property where parties agree to avoid litigation if each party stays within agreed boundaries.

When to Use a Covenant Not to Sue Instead of a Release

While both a covenant not to sue and a release waive legal claims, they serve slightly different purposes and may be used in different scenarios:

  • Covenant Not to Sue: The claimant retains their rights but promises not to exercise them under specific conditions. This is useful in ongoing relationships or where reinstating claims might be needed (e.g., contingent enforcement if the other party defaults).
  • Release: Completely extinguishes the legal claim. Once a release is signed, the claimant no longer has legal rights regarding the covered matter.

A covenant not to sue is often preferable when:

  • You want to keep the agreement in place as long as conditions are met.
  • You are involved in licensing, indemnity, or intellectual property arrangements where ongoing compliance is required.
  • The parties may need to preserve a working relationship.

Key Elements of a Covenant Not to Sue Template

A well-drafted covenant not to sue template should contain the following core elements to ensure it is clear, enforceable, and tailored to the legal context of the agreement:

  • Identification of the Parties: Clearly name the parties entering into the covenant, including legal business names and contact details.
  • Recitals or "Whereas" Clauses: These provide background and context, outlining why the covenant is being made and the events leading up to it.
  • Release Language: A statement affirming that one party agrees not to bring legal action against the other concerning specific claims or disputes.
  • Scope of the Covenant: Define precisely what claims are covered and any limitations (e.g., time period, specific subject matter, or jurisdiction).
  • Consideration: Detail what each party is receiving in exchange for entering into the agreement—often financial compensation, remediation actions, or mutual promises.
  • Governing Law and Venue: Identify the jurisdiction whose laws will govern the covenant.
  • Revocation Clause: Optional, but often included in employment or severance agreements. It allows one party to revoke the agreement within a certain time frame (e.g., seven days), especially in age-related claims as required under the Older Workers Benefit Protection Act (OWBPA).
  • Survival Clause: Specifies that even if part of the agreement is invalidated, the remainder shall remain in effect.

Frequently Asked Questions

1. What is a covenant not to sue template used for? It's used to draft an agreement where one party agrees not to sue another over specific claims, often in settlement or licensing situations.

2. Is a covenant not to sue the same as a release? No. A release extinguishes the claim entirely, while a covenant not to sue is a promise not to pursue the claim—though the right may technically still exist.

3. Can a covenant not to sue be revoked? In certain cases, especially involving employment and age discrimination claims, federal law allows a short revocation period (e.g., seven days).

4. Is a covenant not to sue legally enforceable? Yes, provided it meets legal requirements such as adequate consideration, clarity, and compliance with state or federal laws.

5. Do I need a lawyer to use a covenant not to sue template? While templates are helpful, having an attorney review or draft the document ensures legal enforceability and customization to your situation.

If you need help with a covenant not to sue form, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.