covenant
Definition
A covenant is a formal promise written into a contract that requires you or the other party to either do something specific or refrain from doing something specific. Unlike a general contract term, covenants tend to be long-lasting commitments that follow a property or business relationship even after ownership changes hands.
Example
If you buy a commercial property, it might come with a covenant saying the land can only be used for retail purposes, which means you cannot convert it into a restaurant no matter how great the opportunity looks.
Watch Out
Non-compete covenants in employment or business sale agreements can seriously limit where you work or what business you start next, so always read them carefully before signing.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.