Business, Legal & Accounting Glossary
A signed written agreement between two or more parties (nations) to perform some action.
Covenant is an agreement or promise in the form of a deed binding on one or both parties to it to perform or not to perform certain actions.
Covenants associated with housing may restrict what you may do with your property or they may require you to do certain things.
Covenants associated with the payments of monies may carry tax advantages.
A covenant, in its most general sense, is a solemn promise to engage in or refrain from a specified action.
More specifically, a covenant, in contrast to a contract, is a one-way agreement whereby the covenanter is the only party bound by the promise. A covenant may have conditions and prerequisites that qualify the undertaking, including the actions of second or third parties, but there is no inherent agreement by such other parties to fulfil those requirements. Consequentially, the only party that can break a covenant is the covenanter.
A religious covenant is a belief shared by members of a religious community that God has made a formal alliance or agreement with them or with humanity in general. This sort of covenant is an important concept in Judaism and Christianity, derived in the first instance from the biblical covenant tradition. An example of a covenant relationship in Judaism and Christianity is that between Abraham and God, in which God made a covenant with Abraham that He would bless Abraham’s descendants making them more numerous than the stars[Genesis 15:5 & 15:18]. God made an additional covenant with Jesus Christ, called the “new covenant”, in which Christ’s sacrifice on the cross would atone for the sins of all mankind. Also in Islam God reminds all humanity about their covenants with him. [Qur’an 36:60,61]
A covenant may also refer to an agreement between members of a congregation to work together according to the precepts of their religion. In Islam, God enters into a covenant with Muhammad, impressing into his shoulder the seal of prophecy. In Indo-Iranian religious tradition, Mithra-Mitra is the hypostasis of covenant, and hence keeper and protector of moral, social and interpersonal relationships, including love and friendship. In living Zoroastrianism, which is one of the two primary developments of Indo-Iranian religious tradition, Mithra is by extension a judge, protecting agreements by ensuring that individuals who break one do not enter Heaven.
Under the common law, a covenant was distinguished from an ordinary contract by the presence of a seal. Because the presence of a seal indicated an unusual solemnity in the promises made in a covenant, the common law would enforce a covenant even in the absence of consideration.
In contemporary practice in the USA, a covenant typically refers to restrictions set on contracts like deeds of sale. “Covenants, Conditions, and Restrictions,” abbreviated “CC&Rs,” are a complicated system of covenants, known generically as “deed restrictions,” built into the deeds of all the homes in a common interest development, particularly in the tens of millions of American homes governed by a homeowner association (HOA) or condominium association.
In the 1920s and 1930s, covenants that restricted the sale of property on the basis of race, ethnicity, and religion were common throughout the USA, particularly in the South where the primary intent was to keep “white” neighbourhoods “white”. Such a covenant prohibited a buyer of property from reselling, leasing or transferring “to any coloured person or persons or any person or persons of Ethiopean (sic) or Semitic race or any descendant [of such a race].” These were invalidated by the US Supreme Court by Hansberry v. Lee in 1940. The playwright Lorraine Hansberry wrote the play A Raisin in the Sun based on her father’s experience as lead plaintiff in that case.
In the context of property, covenants can be found on Property Titles that can dictate building materials, roofing materials or place restrictions on the number of dwellings that can be built on the property. The purpose of this is to maintain a neighbourhood character or prevent improper use of the land. Most covenants of this nature were imposed in the 1920s through to the 1940s. It is not uncommon even today for modern development to be restricted by covenants on property titles, however, they can be removed through Courts. This process is lengthy and often very expensive. In some cases, it even involves local plebiscites of the nearby property owners. Control of such planning issues is usually governed by local planning schemes or other regulatory frameworks rather than through the use of covenants.
A covenant is an agreement between two or more parties made in the form of a Deed. Often a deed to convey an estate in land, or grant a Lease, will contain a number of covenants along with the basic terms setting out the transfer or grant of the estate. These covenants usual bind the parties to do, or refrain from doing, something in respect of the land. For example, a Lease will frequently include covenants for repair that impose liability on the Landlord and the Tenant to keep the property in good order. A Conveyance of a Freehold will typically include covenants not to block shared drains, and to avoid using the property in certain ways. Although covenants are commonly encountered in the context of property law, in most particulars a covenant is nothing more than a Contract. A distinction is that covenants, owing to the greater formality occasioned by the use of a deed, do not require consideration to be enforceable.
A distinguishing feature of covenants in property law is that, in some circumstances, they can ‘run with the land’. If a builder (let’s call him Bob) builds a row of houses and sells them to Joe, Jim and Jerry, he can extract from Joe etc., a promise not to block the shared drains. But what happens if Joe sells his house to Susan? Susan and Bob are not parties to any contract, so what happens if Susan falls foul of the original covenant not to block the shared drain? Under the Privity Of Contract, it would be the case that Jim and Jerry could not sue Susan because they are not parties to the covenant. There are contractual ways to make this work and keep the drains flowing, but it would be a shame if seventy years later Fred buys Jim’s house and finds that Susan’s family keep allowing the drains to back up, and he can’t do anything about it. In short, there are ways to make covenants bind successors in title, even absent a contractual obligation. This means that a covenant in property law is somewhat more than simply a contractual agreement.
In property law, covenants are usually ‘negative’ or ‘restrictive’, for reasons explained later. Such covenants oblige the covenantor to refrain from doing something (like blocking a shared drain). ‘Positive’ covenants oblige the covenantor to carry out some specific action, like painting a house.
Technically the benefit of covenant affecting land is a Property right (more technically it is a Servitude), and a chose in action. In the case above, Jim, Jerry and Joe have rights over each others’ land, and those rights may attach to the land, not to the person. This means that when Susan buys Joe’s house she does not have to extract a new agreement from Jim and Jerry. In this, a covenant is similar in effect to an Easement, although covenants are a much more modern development.
The distinction between positive and restrictive covenants has important practical consequences. While covenants can be attached to both leasehold (see freehold covenant) and freehold titles, there is no straightforward way to attach a positive covenant to a freehold. This means that it is difficult to develop and sell properties with shared areas as anything other than leasehold (see: Flying freehold), as it is difficult to impose obligations to maintain the shared areas.
An interesting question is whether, at common law, a covenant now is nothing more than a contract made by deed. Of course, a covenant is very much like a contract made by deed (a covenant is sometimes called a contract under seal), but are these metas of agreement equivalent? If they are equivalent, then the contracts rights of third parties act (1999) should apply to covenants as well as to contracts, which could have important implications for property law in general. Most authorities take it for granted that a covenant will be treated as identical to a contract by a court, but there are a small number of dissenting voices. Undoubtedly covenants have a very different history from contracts. In any event, there are — as far as I know — no court decisions that help much one way or the other. So we shall have to wait and see.
In a historical context, a covenant applies to formal promises that were made under oath, or in less remote history, agreements in which the name actually uses the term ‘covenant’, implying that they were binding for all time.
One of the earliest attested covenants between parties is the so-called Mitanni treaty, dating to the 14th or 15th century BC, between the Hittites and the Mitanni.
Historically, certain treaties and compacts have been given the name of covenant, most notably the Solemn League and Covenant that marked the Covenanters, a Protestant political organization important in the history of Scotland. The term ‘covenant’ appears throughout Scottish, English, and Irish history.
The term covenant could be used in English to refer to either the Bundesbrief of 1291, or the Pfaffenbrief of 1370, documents which led to the formation of the Swiss state or “Eidgenossenschaft”.
In this usage, the German “Eid” is being translated as covenant rather than oath in order to reflect its written status.
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This glossary post was last updated: 27th April, 2020 | 3 Views.