Covenant: Definition, Example and Related Terms

A covenant is a formal agreement or promise between two or more parties, typically found in contracts or deeds. There are two main types: affirmative covenants and negative covenants. An affirmative covenant is a promise to do something, while a negative covenant is a promise not to do something.

For example, in a commercial lease agreement, an affirmative covenant may require the tenant to maintain the property in good condition, while a negative covenant might prohibit the tenant from making structural changes to the property without the landlord’s consent.

Covenants are crucial in various types of agreements, including real estate transactions, loan agreements, and partnership agreements. They help to clearly define the obligations and restrictions for the parties involved, which can prevent disputes and misunderstandings.

It’s essential for both parties to understand the covenants in a contract, as these promises are legally binding. Failing to comply with a covenant can result in legal consequences, such as penalties or the termination of the contract.