Positive covenants: Overview, definition, and example
What are positive covenants?
Positive covenants are contractual obligations that require a party to take certain actions or do something specific. Unlike negative covenants, which restrict certain activities, positive covenants are promises to act in a particular way. These can involve tasks like paying a debt, maintaining property, or providing a service.
For example, in a lease agreement, a landlord may have a positive covenant to maintain the building's structural integrity, while a tenant may have a positive covenant to pay rent on time.
Why are positive covenants important?
Positive covenants are important because they ensure that specific responsibilities are clearly outlined and agreed upon in a contract. They create a clear expectation for both parties about what actions must be taken. If a positive covenant is not fulfilled, the party in breach may face penalties or the termination of the agreement.
This clause is particularly useful when parties need to ensure continuous action or regular obligations, such as keeping up with payments or providing ongoing support or services.
Understanding positive covenants through an example
Imagine a business entering into a contract with a supplier, where the business agrees to maintain a certain level of inventory to meet customer demands. The "positive covenant" here would be a commitment from the business to always keep a minimum stock level. If the business fails to do so, it would be in breach of the covenant.
Another example could be a construction contract where a builder agrees to complete the project by a specific date. The builder’s promise to finish the work on time is a positive covenant because it requires the builder to take action and fulfill a certain obligation.
An example of a positive covenant clause
Here’s how a positive covenant clause might look in a contract:
"The Tenant agrees to maintain the property in good repair and condition and to make any necessary repairs promptly."
Conclusion
Positive covenants require a party to take action or perform a duty under the terms of a contract. They are essential for ensuring that responsibilities are clearly outlined and carried out, helping to avoid disputes and ensuring compliance. Including these clauses ensures that both parties understand their commitments and what they need to do to meet the expectations of the agreement.
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.