Covenant Not to Sue vs. Release: A Key Distinction
What Is a Covenant Not to Sue?
A covenant not to sue is a contractual promise by one party not to bring a lawsuit against another party for specified claims. Unlike a release (which extinguishes the underlying claim entirely), a covenant not to sue preserves the claim but bars the litigation. The right still technically exists — the party simply agrees not to enforce it through legal action.
This distinction may seem academic, but it has significant practical consequences.
Covenant Not to Sue vs. Release
| Feature | Covenant Not to Sue | Release |
|---|---|---|
| Underlying claim | Preserved | Extinguished |
| Effect on third parties | Typically no effect | May release co-defendants |
| Remedy for breach | Breach of contract damages | N/A (claim is gone) |
| Joint tortfeasor impact | Does not release others | May release co-liable parties |
Why Choose a Covenant Not to Sue Over a Release?
The primary reason is to protect claims against other parties:
- In many jurisdictions, releasing one joint tortfeasor automatically releases the others
- A covenant not to sue avoids this problem by preserving the underlying claim
- The settling defendant is protected by the covenant, while claims against non-settling defendants remain intact
This is particularly important in multi-party litigation and partial settlements.
Where Covenants Not to Sue Appear
- Partial settlements in multi-party litigation
- Patent licensing agreements where the patent holder agrees not to sue the licensee
- Insurance settlements where the insurer wants to preserve subrogation rights
- Construction disputes involving multiple parties
What to Watch For
- Scope — Ensure the covenant covers all the claims you intend to resolve
- Duration — Whether the covenant is permanent or time-limited
- Assignability — Whether successors and assigns are bound by the covenant
- Remedy for breach — What happens if the promising party sues despite the covenant (typically breach of contract damages)
When to Consult a Lawyer
The choice between a release and a covenant not to sue can have major implications, especially in multi-party disputes. Consider consulting an attorney to determine which mechanism is appropriate for your situation.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.