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Breach of Covenant

Breach of Covenant

  • Term

    Main definition

  • Breach of Covenant

    A failure to adhere to the terms of a covenant is called a breach of covenant.

    Provisions called covenants are usually included in an investment, financing or other contract in order to impose future obligations on one of the parties.  An affirmative covenant is the promise to do a specific thing or to cause a specific thing to happen and the negative covenant is the promise to refrain from doing a different thing.  Most covenants are continuing covenants that will remain in effect for the entire term of the contract or longer.  In the event of a breach of covenant by one party, the other party sometimes has a right to terminate the contract.

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