Difference Between Covenant and Contract
The difference between covenant and contract is evident when someone breaks either one of the agreements.3 min read
2. Covenants: Introduction
3. Covenant and the Law: Background
4. Contracts vs. Covenants: Comparison
Updated August 21, 2020:
The difference between covenant and contract is evident when someone breaks either one of the agreements. A contract is invalid when one of the involved parties violates it. On the other hand, a covenant remains intact even if one of the parties breaches it. While covenants are a type of contract, they are not treated the same nor are they built on the same premise. Here are the differences between contracts and covenants.
Contracts are agreements enforceable by law. There are critical components to a valid agreement.
- It must have an offer and the offer accepted.
- It must have valuable consideration. Meaning the parties are exchanging something that is equally valuable to the other.
- Both parties must have the legal and mental capacity to enter into a contract.
- One party cannot force the other party to sign a contract.
- The consideration offered is legal.
While it is easier to prove a written contract, oral contracts are valid as well. A contract says, "Do this for me, and I'll do that for you." Verbal agreements are a part of everyone's day-to-day life. Here are some examples:
- You ask an employee to work on a holiday, and in exchange, you give the employee two extra vacation days.
- You give your teenager extra allowance for vacuuming your car.
- You give your wife some jewelry if she lets you go out-of-town with your friends.
A covenant is a written promise between two or more parties where the party either pledges to do something (called an affirmative covenant) or refrains from doing something (call a negative covenant). A covenant is a type of contract. In a covenant, the person making the promise is the covenantor, and the person who is benefiting from the promise is a covenantee.
Covenants are often included in contracts when that happens it becomes part of the agreement. Usually, real property contracts cover covenants. Covenants attached to real property are real covenants. Primarily, they protect people's right to enjoy their property, disruption-free. A covenant defines a relationship by setting rules for the engagement.
Covenant and the Law: Background
Many business people fail to understand the differences between covenants, representations, and warranties.
- A covenant is a promise made by two or more people (a party) vowing to do or not to do something.
- A representation is a factual statement that entices a party to enter into an agreement.
- A warranty is a statement certifying certain things about the contract's subject holds true, and should it become untrue, the affected party has protection from the loss.
Contracts vs. Covenants: Comparison
Contracts and covenants are not the same things. Here are some fundamental differences:
- While a contract is legally binding, a covenant is a spiritual agreement.
- A contract is an agreement between parties while a covenant is a pledge.
- A covenant is an agreement you can break while a covenant is a perpetual promise.
- You seal a covenant while you sign a contract.
- A contract is a mutually beneficial relationship while a covenant is something you fulfill.
- A contract exchanges one good for another, while a covenant is giving oneself to the other.
- You can opt out of a contract while a covenant is about having the strengths to hold up your part of the promise.
- One can stop paying in a contract when one party is not fulling their part in a deal. However, in a covenant, the party not getting their needs me supports the failing party so that they can meet their obligations.
Overall a covenant is a better way to build relationships both in business and in life. In a contract, if a person does not fulfill his obligation, then it gives the other party to back out as well. The same is not true in a covenant. You must hold up your promise even if others do not hold up their pledge.
Covenants are a type of contract, but they do not work like a contract. They are a trust-based promise that relies on your integrity and discipline. While contracts are enforceable by the courts, covenants depend on your values.
If you need help with writing a covenant, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.