Covenants of seller: Overview, definition, and example
What are covenants of seller?
Covenants of seller refer to the specific promises or obligations made by the seller in a contract, particularly in the context of a sale or transfer of goods, services, or property. These covenants are assurances that the seller will meet certain conditions or perform specific actions, such as ensuring the property is free of liens, delivering goods in good condition, or fulfilling other agreed-upon terms. The purpose of these covenants is to protect the buyer and ensure the seller upholds their part of the deal.
For example, in a real estate transaction, the seller might covenant to provide clear title to the property, ensuring it is free from legal claims or debts.
Why are covenants of seller important?
Covenants of seller are important because they provide the buyer with assurances about the quality, condition, or legal standing of what is being sold. By outlining these promises, both parties have a clear understanding of the seller’s responsibilities, which helps prevent disputes and ensures that the buyer receives what they are entitled to. The covenants also serve as legal safeguards, providing the buyer with recourse if the seller fails to meet these obligations.
Understanding covenants of seller through an example
Let’s say a company purchases machinery from a supplier. The seller agrees to certain covenants, such as delivering the machinery in working condition, ensuring it complies with all relevant safety standards, and transferring ownership free of any encumbrances. If the machinery arrives damaged or fails to meet safety regulations, the buyer can rely on the covenants to hold the seller accountable for failing to deliver as promised.
In another example, when purchasing a piece of commercial property, the seller might covenant to ensure the property is free from any environmental hazards or legal disputes. If it’s later discovered that there are contamination issues or unresolved legal claims, the buyer can seek remedies based on the seller’s covenants.
An example of a covenants of seller clause
Here’s how a covenants of seller clause might appear in a contract:
“The Seller covenants that the goods delivered under this Agreement shall be of merchantable quality, free from defects, and compliant with all applicable laws. The Seller further covenants to transfer clear and marketable title to the goods at the time of delivery.”
Conclusion
Covenants of seller are essential to ensure that the buyer receives what was promised in the contract, whether it’s goods, services, or property. These promises provide legal assurance that the seller will meet specific conditions, helping to avoid disputes and ensuring that the transaction is completed as expected. By including clear covenants of seller in contracts, both parties can better manage expectations and minimize potential risks.
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.