Survival of covenants: Overview, definition, and example
What is survival of covenants?
Survival of covenants refers to a provision in a contract stating that certain obligations—typically covenants or promises—will continue to apply even after the agreement ends or the transaction closes. These covenants may relate to confidentiality, non-compete restrictions, indemnification, post-closing cooperation, or other long-term commitments that are meant to outlast the contract’s term.
Why is survival of covenants important?
This concept is important because some obligations are intended to be ongoing and would be meaningless if they expired at closing or termination. Without a survival clause, a party could argue that its duties ended with the agreement. This provision gives legal clarity and ensures that critical commitments—especially those involving post-closing actions or protections—remain enforceable after the main deal is completed.
Understanding survival of covenants through an example
In an asset purchase agreement, the seller agrees not to compete with the buyer’s business for two years. A survival of covenants clause makes clear that this non-compete obligation continues to apply even after the closing date, regardless of whether the main agreement is otherwise concluded.
Example of how a survival of covenants clause may appear in a contract
Here’s how a survival of covenants clause may appear in a transaction agreement:
"The covenants and agreements contained in this Agreement that by their terms are intended to survive the Closing shall remain in full force and effect in accordance with their respective terms, notwithstanding the consummation of the transactions contemplated herein."
Conclusion
Survival of covenants provisions ensure that certain promises remain binding beyond the life of the contract. They protect the parties’ post-closing interests and provide continuity for long-term obligations such as confidentiality, indemnity, and cooperation. Including this clause helps avoid disputes about whether important duties remain enforceable after the deal ends.
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.