Latest Articles

Misc

January 25, 2019

Covenants and Conditions


Word of the day

Covenants and Conditions

Covenants are unconditional promises contained in contracts, the breach of which entitles a person to damages. Conditions, on the other hand, are contingencies, qualifications, or occurrences upon which an estate or property right (like a fee simple) would be gained or lost. Covenants are indicated by words such as promise, undertake, agree; conditions are indicated by words such as if, when, unless, and provided. Because both are limitations only and do not create obligations, failure of the condition to occur will not entitle either party to damages against the other party. Covenants are unconditional promises contained in contracts, the breach of which entitles a person to damages. Conditions, on the other hand, are contingencies, qualifications, or occurrences upon which an estate or property right (like a fee simple) would be gained or lost. Covenants are indicated by words such as promise, undertake, agree; conditions are indicated by words such as if, when, unless, and provided. Because both are limitations only and do not create obligations, failure of the condition to occur will not entitle either party to damages against the other party.


Conditions may be either precedent or subsequent. A condition precedent must happen or be performed before a right or estate is gained; a condition subsequent causes a right to be lost or an estate to be terminated upon its occurrence. 

For example, a lease may contain covenants to repair, or pay taxes, assessments, or rent. If the tenant breaches a covenant, the landlord may sue the tenant for damages. If the lease contains a certain condition and the tenant breaches the condition, then the leasehold interest terminates. Thus, a commercial lease often contains a condition in a defeasance clause that the tenant will forfeit the lease upon the tenant’s being declared bankrupt or upon illegal use of the premises. 

Promises may be both conditions and covenants. For example, the concurrent conditions found in contracts for sale are also covenants. The delivery of the deed by the seller and the payment of the purchase price by the buyer are concurrent conditions; also, they are covenants. Thus, the buyer could sue the defaulting seller for damages only after the buyer met the condition of tendering performance (by placing the purchase money into escrow).
 

Recent Posts

November 26, 2018

After Acquired


November 25, 2018

Affordable Housing


November 24, 2018

Affidavit


Related Post

Industry, Residential Real Estate, Education

Library of Real Estate Clauses

December 16, 2018

Brokerage, Technology, Consumer News, Residential Real Estate, Education, Misc

Short Sales and Tips for Newly Licensed Real Estate Agents

December 5, 2018

Misc

After Acquired

November 26, 2018

Misc

Affordable Housing

November 25, 2018

Misc

Affidavit

November 24, 2018

Brokerage, Consumer News, Residential Real Estate, Misc

Unilateral Contract VS Bilateral Contract

November 23, 2018

2019 Real Town The Real Estate Network