What is a covenant? Broadly speaking, ‘covenants’ are the contractual devices ensuring that a party receives the benefits that it negotiated for in the business deal. In other words, covenants support the achievement of the purpose implied by the key provisions characterising the transaction.
In this section, a brief comparison will be made between covenants as opposed to conditions, various examples of typical covenants in different types of contracts will be discussed (one subparagraph will address M&A-related convenants and another subparagraph will address covenants in financial agreements). This section will finally address how a contract drafter can smoothen the effects of a covenant.