Legal Definitions - without recourse

Without Recourse

The phrase "without recourse" is a legal term indicating that one party cannot hold another party legally responsible or seek compensation from them for a particular matter. It essentially means that a party gives up their right to make a claim or demand payment from someone else, or that a transferring party is absolved of future liability related to the transferred item.

• In legal disputes: When a party acts or agrees "without recourse," it often means they cannot sue another party for a specific alleged injury or, if they do, they cannot obtain the desired legal remedy or financial compensation from that party.
• In financial transactions: This term is frequently used when transferring a financial asset, such as a debt or a promissory note, to another party. By adding "without recourse," the original holder who transfers the asset explicitly states they will not be liable if the asset later proves to be uncollectible or encounters other issues. The risk of default or defect is transferred entirely to the new holder.

Here are some examples illustrating the application of "without recourse":

• Example 1: Waiver in a Recreational Activity

  A participant in a charity bicycle race signs a registration form that includes a clause stating they participate "without recourse" against the event organizers for any minor injuries sustained during the race, provided the organizers were not grossly negligent.

  Explanation: By signing this agreement, the participant explicitly waives their right to sue or seek compensation from the event organizers for typical, non-negligent race-related injuries. They accept the inherent risks of the activity, understanding they cannot hold the organizers legally responsible for such outcomes.

• Example 2: Sale of Accounts Receivable

  A small manufacturing company sells its outstanding customer invoices (known as accounts receivable) to a specialized factoring company to quickly access cash. The agreement specifies that this sale is made "without recourse" to the manufacturing company.

  Explanation: If some of the manufacturing company's customers later fail to pay their invoices, the factoring company cannot demand payment back from the manufacturing company. Because the sale was "without recourse," the factoring company has assumed the full risk of customer non-payment, and the manufacturing company is absolved of any responsibility for those defaults.

• Example 3: Purchase of a Used Item "As Is"

  A buyer purchases a vintage car from a private seller, and the sales contract clearly states that the vehicle is sold "as is, without recourse" regarding its future mechanical condition or any hidden defects.

  Explanation: This means the buyer cannot later claim against the seller if the car develops mechanical problems or if a previously unknown defect emerges after the sale, provided the seller did not intentionally misrepresent the vehicle's condition. The buyer has accepted the risk of future issues without the ability to seek remedy or compensation from the seller for those specific problems.