Covenants of the seller: Overview, definition, and example
What are covenants of the seller?
Covenants of the seller are specific promises or obligations made by the seller in a contract, particularly in the sale or transfer of goods, property, or services. These covenants can include assurances regarding the condition of the product or property, compliance with applicable laws, or the absence of encumbrances, such as liens or debts. Essentially, the seller is promising that they are providing what they agreed to and that the buyer will not face unexpected risks or losses due to issues with the product or service.
For example, a seller may covenant that a piece of property is free of any legal claims and that there are no environmental hazards present.
Why are covenants of the seller important?
Covenants of the seller are important because they protect the buyer by ensuring the seller fulfills their obligations and that the goods or property being transferred meet certain standards. These covenants help prevent misunderstandings and provide legal recourse for the buyer if the seller fails to meet the agreed-upon conditions. For the seller, covenants can help establish trust and clarify the terms of the sale, reducing the risk of disputes after the transaction is completed.
Understanding covenants of the seller through an example
Let’s say a company is purchasing a commercial property from a seller. As part of the sale agreement, the seller includes a covenant that the property is free of any environmental contamination or legal disputes. If it is later discovered that there are hazardous materials on the property or unresolved legal issues, the buyer can seek legal remedies based on the breach of the seller’s covenants.
In another example, a seller of a used vehicle might covenant that the car is free from major mechanical defects and has not been involved in any serious accidents. If the vehicle turns out to have undisclosed issues, the buyer may have legal grounds to seek compensation or return the car under the terms of the covenant.
An example of a covenants of the seller clause
Here’s how a covenants of the seller clause might appear in a contract:
“The Seller covenants that the goods sold under this Agreement are free from defects in materials and workmanship, and that the goods are not subject to any liens, claims, or encumbrances. The Seller further covenants that the goods comply with all applicable laws and regulations.”
Conclusion
Covenants of the seller are essential promises that protect the buyer’s interests by ensuring that the seller meets specific standards and provides goods or property that are free from defects, legal claims, or other issues. These covenants help establish trust between the parties and provide legal remedies in the event of a breach. Including clear and enforceable covenants in contracts is crucial for ensuring that both parties understand their rights and obligations.
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.