Additional covenants of the parties: Overview, definition, and example
What are additional covenants of the parties?
Additional covenants of the parties refer to extra promises or commitments made by the parties involved in a contract that go beyond the main terms and obligations of the agreement. These covenants are typically included to address specific concerns or requirements that arise during the course of the contract. They are legally binding and provide further clarity on how the parties should act or refrain from acting in certain situations.
For example, an additional covenant might require a business to maintain certain insurance coverage during the term of a contract or may specify that a company will provide regular financial reports to the other party.
Why are additional covenants of the parties important?
Additional covenants are important because they provide further detail and protection in a contract. By including these covenants, the parties can ensure that specific issues are addressed and that there are clear expectations for behavior or actions that may not have been covered in the main body of the agreement. These covenants help to minimize misunderstandings, protect interests, and ensure that both parties fulfill all of their commitments.
For businesses, these additional covenants can help avoid potential legal disputes or financial risks by providing clear guidelines. For individuals, these covenants can offer peace of mind, knowing that extra terms are in place to protect their interests.
Understanding additional covenants of the parties through an example
Imagine a company entering into a partnership agreement with another business. In addition to the main terms of the partnership, such as profit-sharing and roles, the agreement might include an additional covenant stating that both parties agree to resolve any disputes through mediation before pursuing legal action. This additional covenant provides a clear path for resolving conflicts and helps to prevent lengthy and expensive lawsuits.
In another example, a supplier might include an additional covenant in a contract with a retailer, requiring the retailer to maintain a certain level of stock in their stores and provide quarterly sales reports. This covenant goes beyond the standard terms of product delivery and sets expectations for the ongoing relationship.
An example of an additional covenants of the parties clause
Here’s how a clause about additional covenants of the parties might appear in a contract:
“In addition to the main terms of this Agreement, the Parties agree to the following additional covenants: (1) The Supplier shall provide quarterly financial statements to the Buyer, (2) The Buyer agrees to maintain insurance coverage on all goods during transit, and (3) Both Parties agree to resolve any disputes through arbitration.”
Conclusion
Additional covenants of the parties provide extra promises or obligations that supplement the primary terms of a contract. These covenants help clarify expectations and offer protection against potential risks or uncertainties. For businesses and individuals, including additional covenants in contracts ensures that all important aspects of the agreement are addressed and that both parties understand their responsibilities and commitments.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.