Key Takeaways

  • An enurement clause ensures that the rights, obligations, and benefits of a contract extend beyond the original parties to include their heirs, successors, and assigns.
  • In nonprofit law, the private inurement doctrine prohibits any part of an organization’s earnings from benefiting insiders.
  • Properly drafted enurement provisions are crucial in mergers, acquisitions, estate transfers, and corporate restructurings.
  • Enurement clauses often work hand-in-hand with assignment and succession clauses to ensure continuity in contractual relationships.
  • Misunderstanding or omitting enurement terms can lead to disputes, unenforceable contracts, or unintended transfer of rights.

Enurement clause definition is where something takes place or has an effect, while inure means to bring by habit, continuous exercise, or use to a specific state of mind or condition, or the endurance of a specific condition. Enure is often written as inure, and an example of it is saying a new tax will ensure to the advantage of all the residents of Madison County. An inurement clause is a document that's legal, such as a will or contract, and extends the document's benefits past their signatories.

Private Inurement Doctrine

A private inurement doctrine is another private advantage rule, applying to public charities. The doctrine is from section 501 of the Internal Revenue Code that states that only organizations who have no part of the net earnings that are inured to the benefit of the individual or private shareholder can be exempt. The inurement or restriction is absolute, and incidental private inurement is not allowed. The private inurement doctrine is stricter in rules than the private benefit doctrine, which applies to anyone.

An individual or private shareholder is someone who has a private and personal interest in the organization's activities. The private inurement doctrine often applies to those who are insiders, which means people in a position to control or influence the use of the assets for their own personal gain. This includes the following:

  • Directors
  • Founders
  • Officers

Public charities should understand that the private inurement doctrine doesn't stop the organization from having transactions with insiders. However, it does prevent an uneven share of benefits from being provided by the organization to an insider, no matter if the inurement is $2 or $2,000. Violations of private inurement may occur where compensation is arranged with an insider that has no upper limit, an arrangement is based off outside factors to benefit the organization, and if the net or gross earnings are used to provide services and goods to insiders.

Understanding Enurement in Contract Law

In legal terms, enurement refers to the extension of a contract’s rights, duties, or benefits beyond the original parties involved. When a provision "enures" to someone, it means it legally applies to and benefits that person or entity, even if they did not originally sign the agreement. Most commonly, an enurement clause ensures that a contract remains binding on and benefits the heirs, executors, administrators, successors, and assigns of the parties.

For example, if a company enters into a long-term service agreement and is later acquired, a well-drafted enurement clause ensures that the acquiring company inherits both the benefits and obligations of the contract. Without such a clause, the agreement might not automatically transfer, potentially leading to disputes or gaps in legal responsibility.

Enurement clauses are essential in scenarios such as:

  • Mergers and acquisitions, where contracts must transfer to the new owner.
  • Estate planning, ensuring contractual obligations survive the death of a party.
  • Corporate reorganizations, where rights and duties pass to successor entities.
  • Assignment of contracts, extending enforceability to third parties who assume a contract.

Importantly, the inclusion of an enurement provision also signals the parties’ intent for continuity and predictability, reducing the risk of litigation over whether contractual terms survive ownership or structural changes.

Legal Tips and Tricks: Boilerplate Provisions of Your Agreement

The provisions of the agreement shouldn't be ignored. The language might seem similar every time the clauses are read, but there are small differences that will end up making an impact on how the acquisition transaction documents or commercial agreement is interpreted. The documents can be long, so it's easy to not pay attention to this and have your eyes glaze over by the end. Words such as "waiver," "arbitration," "amendment," "severability," and "assignment" may seem similar, but you need to make sure you understand what their meaning is in someone else's contract.

Clauses are often standard or boilerplate and have repeated language. If you don't understand the small nuances in the contract, it can work either for you or against you. Having a checklist of what should be included in a standard contract is smart so you can compare it to any agreements that are sent to you. For example, make sure that you're not changing the agreement each time you talk about it. If amendments are made, they need to be done in writing and signed by every party.

A person or company should have the ability to assign a contract to an acquiring company or holding company they own. Often in contracts, only one party is able to assign the agreement. When the enurement clause is together with the assignment clause, it extends all benefits of the contract to the successors or assigns when it's correctly drafted. This means the successor's estate is able to benefit from the contract. If there's an assign, merging or acquiring third parties would benefit from the contract.

The waiver clause maintains your rights in case you were too relaxed about having your contract enforced and the counterparty tried to say that the contract is more flexible now. The legal concept that repeating or continuing waiver of a specific right can be interpreted into an intentional relinquishment if known as the doctrine of waiver. This should be prevented with a no waiver clause that states your rights won't be diminished just because you're being nice.

If there are any ongoing expenses that can come from an agreement negotiation, there should be a costs clause to make clear which party will pay for the continuous legal expense.

Drafting and Enforcing Enurement Clauses

Because enurement clauses are often treated as boilerplate language, they are sometimes overlooked — yet they play a vital role in ensuring contractual stability over time. When drafting or reviewing these provisions, it’s important to consider several key points:

  1. Clarity of Beneficiaries: Clearly identify who will benefit from the enurement — such as “heirs, executors, administrators, successors, and permitted assigns.” Ambiguous language can lead to interpretation disputes.
  2. Alignment With Assignment Clauses: Enurement and assignment provisions should work together. While enurement extends benefits and obligations automatically, an assignment clause governs how and when those rights can be transferred.
  3. Survival After Termination: In certain cases, you may want the enurement clause to ensure that obligations survive termination — for example, confidentiality or indemnification obligations.
  4. Jurisdictional Compliance: Different jurisdictions interpret enurement differently. Some courts strictly enforce these clauses as written, while others may require explicit consent from third parties.

For instance, a typical enurement clause might read:

“This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors, and permitted assigns.”

This language guarantees that successors and assigns can enforce or be bound by the agreement without renegotiating terms. However, it is equally important to ensure the rest of the contract — particularly assignment and termination clauses — does not contradict or limit the intended scope of enurement.

Frequently Asked Questions

  1. What does “enurement” mean in legal terms?
    Enurement refers to a contract’s ability to extend its rights, obligations, and benefits beyond the original parties to include their successors, heirs, and assigns.
  2. Why are enurement clauses important in contracts?
    They ensure that contracts remain valid and enforceable even when parties change due to mergers, acquisitions, death, or assignment.
  3. Can an enurement clause apply without an assignment clause?
    Yes, but it’s best practice to include both. Enurement ensures benefits and obligations transfer, while assignment outlines how that transfer occurs.
  4. Are enurement clauses required by law?
    They are not mandatory but are highly recommended to protect parties’ interests and ensure continuity in contractual relationships.
  5. What happens if a contract lacks an enurement clause?
    Without it, the contract may not automatically transfer to successors or assigns, potentially rendering it unenforceable or requiring renegotiation.

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