Confession of judgment
Encyclopedia
Confession of judgment is a legal term that refers to a type of contract
(or a clause with such a provision) in which a party agrees to let the other party enter a judgment against him or her. Such contracts are highly controversial and may be invalidated as a violation of due process
by courts, since the obligor is essentially contracting away his right to raise any legitimate defenses.
Confessions of judgment are permitted in many states. New Jersey
and Pennsylvania
permit them, among others. Some states, including Michigan
, require they be specially labelled or have other procedural requirements. However, according to testimony before an Alaska State Legislature committee, "Confession of Judgment is illegal in Alaska, it's illegal in Pennsylvania in consumer transactions, but not in commercial transactions." A Law Review article distinguishes three groups of state laws, one group comprising seventeen states that make void any agreement to confess judgment entered into before commencement of a suit.
A typical confession of judgment reads, "The undersigned irrevocably authorizes any attorney to appear in any court of competent jurisdiction and confess a judgment without process in favor of the creditor for such amount as may then appear unpaid hereon, and to consent to immediate execution upon such judgment."
Such clauses should be distinguished from liquidated damages
clauses, which do not result in binding judgments against the obligor.
A confession of judgment may also be called a cognovit note.
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
(or a clause with such a provision) in which a party agrees to let the other party enter a judgment against him or her. Such contracts are highly controversial and may be invalidated as a violation of due process
Due process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
by courts, since the obligor is essentially contracting away his right to raise any legitimate defenses.
Confessions of judgment are permitted in many states. New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
and Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
permit them, among others. Some states, including Michigan
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....
, require they be specially labelled or have other procedural requirements. However, according to testimony before an Alaska State Legislature committee, "Confession of Judgment is illegal in Alaska, it's illegal in Pennsylvania in consumer transactions, but not in commercial transactions." A Law Review article distinguishes three groups of state laws, one group comprising seventeen states that make void any agreement to confess judgment entered into before commencement of a suit.
A typical confession of judgment reads, "The undersigned irrevocably authorizes any attorney to appear in any court of competent jurisdiction and confess a judgment without process in favor of the creditor for such amount as may then appear unpaid hereon, and to consent to immediate execution upon such judgment."
Such clauses should be distinguished from liquidated damages
Liquidated damages
Liquidated damages are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach ....
clauses, which do not result in binding judgments against the obligor.
A confession of judgment may also be called a cognovit note.