What Is Without Prejudice Clause in a Contract?
A without prejudice clause in a contract ensures that each party in the contract maintains their legal rights and privileges.3 min read
A without prejudice clause in a contract ensures that each party in the contract maintains their legal rights and privileges. Neither party will have a loss of rights.
A without prejudice clause directly contracts with a prejudice clause, which states that one or more parties will have a complete loss of all rights, preventing them from taking any further action on a certain claim.
Without prejudice, clauses are most frequently used in British Commonwealth countries as a part of settlement discussions. However, they can still be found in some American contracts. One example of a without prejudice clause is:
- "Without prejudice to the representations, warranties or covenants regarding the status of any party hereto as a Citizen of the United States, each of Owner Participant, Owner Trustee and Trust Company agrees that, during the Term, in the event its status is to change or has changed as a Citizen of the United States or it makes public disclosure of circumstances as a result of which it believes that such status is likely to change, it will ..."
The Without Prejudice Clause and Court Cases
For the most part, documents that have a without prejudice clause cannot be used in a court case as evidence. They also cannot be used as a precedent or as the signer's last word about the matter at hand.
However, if a case has settled outside of court, a document containing a without prejudice clause may apply. It all depends on how genuine the reconciliation effort is and whether or not the words "without prejudice" were actually used in the document.
What if You Add a Without Prejudice Clause to Your Contract?
If you add this type of clause to your contract, you'll be giving your assent to the agreement as well as reserving your right to later challenge the terms of the contract. For example, if you are working on a credit contract with a mandatory arbitration clause, you could add a without prejudice clause to protect your rights. This would enable you to challenge that specific clause of the contract if there are problems.
Typically, a without prejudice clause is not used with a noncontentious contractual negotiation. Mostly, lawyers use them when creating interparty communications for litigation or dispute purposes.
Without prejudice is an old-fashioned idea related to the bureaucratic instinct of other terms, such as "notwithstanding." Instead of using without prejudice in your contract, try a simpler phrase like "will not affect." You might also want to omit the idea altogether.
A keyword in any without prejudice clause is "notwithstanding." It's used to show that any provision that comes after has limits in scope by another provision. Equivalent phrases in ordinary English include:
- In any case
- Without regard to or impediment by other things
- Even if
- In any event
Many people use this language in their contracts to protect conflicting provisions, but it is often redundant. That's because it's very difficult for the other party to argue that a notwithstanding provision is a separate or limited function of another provision.
Difference Between Notwithstanding and Subject To
Notwithstanding is similar to the phrase "subject to," which is also frequently used in legal contracts. The main difference between the two is that notwithstanding is typically used in a superseded clause while prevailing clauses use subject to.
Subject to alerts a reader of the contract that there is another provision that might be met. If notwithstanding is in the contract instead, the reader might know realize that there is a prevailing provision.
Notwithstanding is also able to make two contingent provisions seem equal in value when it's not necessarily the case. Using subject to clears up this ambiguity by making one provision subordinate to another without implying that there is any overlap or contradiction.
The problem is even worse if you use "notwithstanding the foregoing" in a contract. By doing this, you might make it seem like the provision in question is close at hand, rather than related to the previous sentence or even the preceding part of the contracting body. To avoid this confusion, simply refrain from using notwithstanding the foregoing at all.
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