A confession of judgment is a clause in a contract in which one party essentially waives the right to trial in the event of a default on the terms of the contract. Under the confession of judgment, the creditor can go directly to court to demand a judgment against the debtor without notifying the debtor, and the court can enter a judgment with which the debtor is obliged to comply. Some nations have banned this practice, arguing that people give up too many legal rights when they agree to a clause of this nature, while others have allowed it, but only in limited legal situations, with some protections which are designed to ensure that people do not lose their legal rights.
This type of clause can be seen in rental agreements, mortgage contracts, and a wide variety of other contracts. Essentially, the debtor indicates that she or he accepts liability, and the creditor can use this in the event of default to have a judgment entered immediately. The argument for the confession of judgment is that it streamlines the system used to recover damages in the event of a default, saving money by keeping the case out of court. The argument against it is that it can be abused.
If a creditor brings a confession of judgment to court on the grounds of a default, the judge can award damages immediately and the debtor will be notified of the judgment and the damages. However, the debtor can potentially fight the damages if he or she can prove that they were awarded with incomplete information or that the confession of judgment should not apply in this case. If a debtor finds out that a judgment has been entered, it is a good idea to consult a lawyer to find out what the legal options are.
Creditors often want to include a confession of judgment in their contracts to protect themselves, so that they can get prompt access to the debtor's assets if the debtor defaults. Debtors should think carefully before signing contracts with such a clause, however, as they may sign away their legal rights in the process. A lawyer can review the contract and provide specific advice, and people should remember that they have the right to refuse a contract or to ask that changes be made, although the other party may opt to end negotiations and refuse to deal.