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Preclusion: Definition, Example and Related Terms

What is a Preclusion ?

Preclusion, in the context of commercial contracts, is a legal principle that stops or 'precludes' a person or business from going back on their word or denying a fact that they previously agreed to. This might sound complex, but basically, it means once you've made a decision or agreement in a contract, you can't change your mind later to suit your needs. This principle is very important in business dealings because it ensures stability and predictability in commercial relationships.

For instance, if a business agrees in a contract to provide a certain service or product at a specific price, preclusion prevents that business from later denying that agreement or trying to change the price. This helps keep businesses accountable for their agreements and promises.

It's important to note that preclusion can apply to both oral and written agreements. However, written contracts are usually stronger and more enforceable because they provide clear, tangible evidence of the agreement. As a commercial contract manager, understanding the principle of preclusion can help you ensure that your contracts are fair, enforceable, and protect the interests of all parties involved.

It's also worth noting that there are different types of preclusion in law, including issue preclusion (also known as collateral estoppel) and claim preclusion (also known as res judicata). These concepts are related but have distinct applications and legal effects. Issue preclusion prevents a party from relitigating an issue that has already been decided in court, while claim preclusion prevents a party from suing on a claim that has already been adjudicated.

While these legal concepts might sound intimidating, they're really about fairness and consistency. They ensure that once a decision has been made or an agreement reached, everyone has to stick to it. This helps create a predictable and stable environment for doing business, which is essential for any successful commercial enterprise.


  • Scenario Description
    Imagine a company, ABC Corp. agrees to sell 1000 widgets to XYZ Corp. at $10 per widget in a written contract. Later, ABC Corp. tries to increase the price to $15 per widget. Preclusion would prevent ABC Corp. from doing this because they already agreed to the $10 price in the contract.
    In another scenario, a software company agrees to provide ongoing maintenance and updates for a client's software system. However, after a few months, the software company tries to deny this agreement and stop providing the services. Preclusion would prevent the software company from backing out of their agreement, as it was clearly stated in the contract.