Definitions (2)

1. Written, solemn, and binding agreement.
2. Binding promise explicitly or implicitly stipulated in a deed or contract (a loan agreement, for example), by a covenantee (a lender, for example), which the covenanter (a borrower, for example) must agree to (otherwise there is no agreement or deal). Once agreed to, the covenant is usually enforceable even if it is unwarranted and/or is unsupported by a consideration. A covenant need not be explicit if its implication is necessary to carry out the intention of the explicit covenant(s). Covenants can cover virtually anything; in a loan agreement, for example, covenants can restrict size of a firm's total debt, salaries of managers, and dividends to shareholders. A covenant may be (1) Positive, when it forces an action, (2) Negative, when it restrains or prevents, (3) Independent, when applicable on its own, or (4) Dependent, when its application requires a specific condition to occur.

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