A cognovit, a type of confession of judgment, refers to an acknowledgment or confession made by a defendant that the plaintiff’s cause is legitimate. It permits judgment to be entered without a trial for the purpose of saving costs. To apply a cognovit, one party usually authorizes the entry of judgment against themself in the event of their breach or default by inserting a cognovit provision in an agreement.

Cognovits offer a cost-effective and efficient way for lenders to recoup their losses when a commercial borrower defaults on a loan. Incorporating a cognovit provision in a promissory note, guaranty or other instrument provides many advantages, including accelerating the process and reducing the expenses involved in securing a judgment and collecting the debt. Instead of the lender having to expend the significant time, money and resources to file a lawsuit, a cognovit expedites the entry of judgment, enabling the lender to quickly commence collection efforts. Given the bottleneck in the courts and the unpredictability of pursuing claims through the adversarial process, cognovits represent an efficient, reliable and appropriate method of securing judgments following defaults on commercial loans.

The question of their constitutionality reached the Supreme Court in D.H. Overmyer v. Frick (1972), where the Court held that a cognovit does not, per se, violate the Due Process Clause of the Fourteenth Amendment. In that case, the Court found that the debtor executed the note containing the confession of judgment clause voluntarily, knowingly, and intelligently, and for valuable consideration. However, in dicta, Justice Blackmun noted that the use of such clauses in adhesion contracts, where there is significantly unequal bargaining power between parties, may still be unconstitutional

Some states, such as Indiana, prohibit the use of confession of judgment clauses in contracts. In 2020, the Maryland Court of Appeals held that state law prohibits the use of confession of judgment clauses in consumer transactions. In 2019, New York amended its laws to limit the use of confessions of judgment against out-of-state debtors.

[Last updated in July of 2022 by the Wex Definitions Team]