Legal Definitions - dependent covenant

A dependent covenant refers to a promise or obligation within a contract where one party's duty to perform is directly conditional upon the other party first fulfilling their own related promise. In simpler terms, one promise "depends" on the other; if the first promise is not kept, the second party is generally excused from performing their dependent promise. This legal concept ensures that parties receive what they were promised before they are required to deliver their part of the bargain.

• Example 1: Home Renovation Contract

  Imagine a homeowner hires a contractor to remodel their bathroom. The contract explicitly states that the homeowner will make the final payment of $5,000 only after the contractor has completed all work, passed the final inspection by the city, and provided a certificate of completion. The homeowner's promise to make the final payment is a dependent covenant.

  Explanation: The homeowner's obligation to pay the final sum is entirely dependent on the contractor first fulfilling their promise to complete the work and secure the necessary approvals. If the contractor fails to finish the work or doesn't obtain the certificate, the homeowner is not legally obligated to make that final payment until the contractor's conditions are met.

• Example 2: Software Licensing Agreement

  A small business enters into an agreement with a software vendor. The agreement stipulates that the vendor will provide ongoing technical support and software updates only if the business maintains its annual license fee payments without interruption. The vendor's promise of support and updates is a dependent covenant.

  Explanation: The vendor's commitment to provide technical support and updates is conditional upon the business consistently paying its annual license fees. If the business stops paying, the vendor is no longer obligated to provide the promised support and updates, as their promise was dependent on the business's prior performance.

• Example 3: Commercial Real Estate Lease

  A landlord agrees to install new, energy-efficient HVAC systems in a commercial property provided that the tenant signs a new ten-year lease extension. The landlord's promise to upgrade the HVAC system is a dependent covenant.

  Explanation: The landlord's obligation to install the new HVAC systems is directly dependent on the tenant first fulfilling their promise to sign a long-term lease extension. If the tenant decides not to sign the ten-year extension, the landlord is not required to proceed with the HVAC upgrades.