Independent covenants: Overview, definition, and example
What are independent covenants?
Independent covenants are contractual obligations in which each party’s promise or performance is independent of the other party’s obligations. In other words, the fulfillment of one party’s promise does not depend on the other party's performance or actions. Independent covenants allow a party to enforce their rights even if the other party fails to perform their own obligations under the contract. These covenants are often contrasted with dependent covenants, where the obligations are interrelated, and one party’s performance is a condition for the other party's obligation to arise.
For example, in a lease agreement, a tenant may agree to pay rent regardless of whether the landlord performs maintenance or other duties outlined in the lease.
Why are independent covenants important?
Independent covenants are important because they provide clear, enforceable obligations for each party in a contract. By making each covenant independent, the contract ensures that one party’s failure to fulfill their obligations does not excuse the other party from performing their own duties. This clarity helps prevent delays or disputes, as one party cannot withhold performance based on the other party’s nonperformance. For businesses, independent covenants provide greater certainty and enforceability in contract law, helping ensure that obligations are met even if the other party fails to perform.
For example, a supplier may deliver goods regardless of whether the buyer has paid the previous bill, as the payment obligation is typically an independent covenant.
Understanding independent covenants through an example
Imagine a contract between a landlord and a tenant, where the tenant agrees to pay rent on time and the landlord agrees to maintain the property. These are independent covenants, meaning that even if the landlord fails to maintain the property as promised, the tenant is still obligated to pay the rent. Similarly, if the tenant fails to pay rent, the landlord can still enforce their right to receive rent payments, regardless of whether the tenant is satisfied with the property maintenance.
In another example, a contractor may agree to complete construction work by a certain date, while the property owner agrees to make scheduled payments regardless of whether the work is fully completed on time. Even if the contractor is late, the property owner must still make payments according to the contract, as the payment covenant is independent of the completion covenant.
An example of an independent covenants clause
Here’s how an independent covenants clause might appear in a contract:
“Each party’s obligations under this Agreement are independent covenants, and the performance or nonperformance of one party’s obligations shall not affect the other party’s obligations. The Tenant shall pay rent regardless of whether the Landlord fulfills its maintenance obligations, and the Landlord shall not be excused from enforcing payment due to any failure by the Tenant to comply with the lease terms.”
Conclusion
Independent covenants are a crucial element in many contracts, ensuring that each party’s obligations are enforceable without being dependent on the other party’s performance. By clarifying that promises are independent, contracts reduce the risk of delays and disputes, ensuring that both parties fulfill their responsibilities. Independent covenants provide greater legal certainty, making it easier for parties to enforce their rights and obligations in a contract.
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.