Contract Conditions and Contract Covenants
To understand contract conditions and contract covenants, you first need to understand what a covenant is.3 min read
To understand contract conditions and contract covenants, you first need to understand what a covenant is. A covenant is basically a promise to do something. One type of covenant example is when a deed includes a covenant of quiet enjoyment. A condition within a covenant is a particular promise that must be met. If the promise isn't kept, then a certain property right may be lost, or it could be gained.
When Can a Covenant Be Used?
A covenant can be used when two or more parties decide to make an agreement, or if they make promises to one another. In some covenants, a pledge is made to perform a certain action. In others, a promise is made to not perform a certain action. A covenant can also include a written agreement that outlines what can and cannot take place on a certain piece of property.
Covenants are commonly used in the real estate industry. They can be used when leases are agreed upon as well as when mortgages and contracts for deed are created. If one party doesn't abide by the terms and conditions outlined in the contract, a breach of the covenant can be claimed.
What Is a Covenant of a Warranty Deed?
When a covenant is used in a warranty deed, this means certain promises have been made by the grantor. If something happens and the promise in the covenant cannot be kept, the heir of the covenant will be compensated by the grantor.
What Kind of Language Is Used in a Covenant?
A lot of the time, covenants use certain language, like:
- Convey and warrant,
- Warrant generally,
- Warrant specifically.
It's important to understand that covenants are outlined in contracts, and if any promises aren't kept, this means a certain party in the covenant will be entitled to certain compensation for any damage that arose due to the breach.
Are Conditions and Covenants the Same Thing?
Conditions are not covenants. They are more like contingencies or qualifications. They outline when a piece of property may be gained or lost if certain contingencies aren't met. Covenants are commonly indicated in a contract through various words, like:
Conditions, however, commonly use language like:
What Are Precedent and Subsequent Conditions?
Conditions in no way create obligations. They simply outline various limitations. If a certain condition does not occur, this doesn't necessarily entitle a party to compensation for damages. Conditions can be one of the two types: precedent or subsequent. When a condition precedent is put into place, this means it must occur before a right to a piece of real estate is gained. When a condition subsequent is put into place, this outlines how the piece of property can be lost if a certain obligation is not carried out.
Example of Contract Conditions
An example of a lease that includes conditions is when a renter agrees to pay rent in exchange for having a place to live. In exchange, the landlord also agrees to provide landscaping duties, pay taxes, and keep the structure in a habitable condition. If the lease between the tenant and landlord contains conditions and one of these conditions is breached by the tenant, this may give the landlord the right to have the tenant evicted. Commercial leases are often used when a property owner leases part of his structure to a certain business to be used for commercial purposes.
Common types of covenants used when a person is selling a piece of property include:
- The buyer makes a promise to pay.
- The seller promises to deliver a marketable title as well as procure title insurance for the person buying the piece of property.
The seller may also be obligated to fix certain damages to the property in exchange for the buyer paying for the property.
When a commercial transaction takes place, a buyer will often want the seller to meet certain obligations during the period of time that the transaction is taking place, which can sometimes be several weeks or several months. For example, a buyer may want the seller to close up shop and not perform any further business out of the building while the sale is taking place.
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