Definition of Covenant:
Binding promise explicitly or implicitly stipulated in a deed or contract (a loan agreement, for example), by a covenantee (a lender, for example), which the covenanter (a borrower, for example) must agree to (otherwise there is no agreement or deal). Once agreed to, the covenant is usually enforceable even if it is unwarranted and/or is unsupported by a consideration. A covenant need not be explicit if its implication is necessary to carry out the intention of the explicit covenant(s). Covenants can cover virtually anything; in a loan agreement, for example, covenants can restrict size of a firms total debt, salaries of managers, and dividends to shareholders. A covenant may be (1) Positive, when it forces an action, (2) Negative, when it restrains or prevents, (3) Independent, when applicable on its own, or (4) Dependent, when its application requires a specific condition to occur.
In legal and financial terminology, a covenant is a promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out or that certain thresholds will be met. Covenants in finance most often relate to terms in a financial contract, such as a loan document or bond issue stating the limits at which the borrower can further lend.
Agree by lease, deed, or other legal contract.
Written, solemn, and binding agreement.
Covenants are most often represented in terms of financial ratios that must be maintained, such as a maximum debt-to-asset ratio or other such ratios. Covenants can cover everything from minimum dividend payments to levels that must be maintained in working capital to key employees remaining with the firm.
Synonyms of Covenant
Accord, Agree, Agree on, Agree to, Agree with, Agreement, Arrangement, Bargain, Bargain for, Binding agreement, Bond, Cartel, Collective agreement, Come around to, Come to terms, Compact, Concur, Consortium, Contract, Convention, Covenant of salt, Deal, Dicker, Do a deal, Employment contract, Engage, Formal agreement, Get together, Ironclad agreement, Legal agreement, Legal contract, Make a deal, Mutual agreement, Pact, Paction, Pledge, Plight, Promise, Protocol, Shake hands on, Shake on it, Stipulate, Stipulation, Strike a bargain, Swear, Transaction, Understanding, Undertake, Union contract, Valid contract, Vow, Wage contract, Undertake, Give an undertaking, Pledge, Promise, Agree, Contract, Vow, Guarantee, Warrant, Commit oneself, Bind oneself, Give ones word, Enter into an agreement, Engage, Contract, Compact, Treaty, Pact, Accord, Deal, Bargain, Settlement, Concordat, Protocol, Entente, Agreement, Arrangement, Understanding, Pledge, Promise, Bond, Indenture, Guarantee, Warrant
How to use Covenant in a sentence?
- Dr. Sheldon Cooper on TV�s Situation Comedy series, The Big Bang Theory, often references his covenant or roommate agreement to Leonard and his relationship covenant to Amy.
- The covenant makes a direct statement that all improvements to building and land must be unanimously approved by the board of directors and cannot exceed the time period given to complete the project.
- Covenants exist in financial contracts, such as bond issues, that set out certain activities that will or will not be carried out.
- Covenants are legally binding clauses, and if breached will trigger compensatory or other legal action.
- Covenants that allow certain activities are called affirmative, while those that restrict are classified as negative covenants.
- The man had to sign a covenant at the bank which stated that he was responsible to pay back the cost of the property when he purchased his house.
- The landlord covenants to repair the property.
- There was a covenant between them that her name was never to be mentioned.
Meaning of Covenant & Covenant Definition