Tag Archives: Legal English vocabulary

LEGAL ENGLISH: WHAT DOES A CONTRACT DO?

A contract establishes the terms of the parties’ relationship. It reflects their agreement as to the rules that will govern their transaction.

The rules generally include:
➡️the statements of facts that each party made that induced the other to enter the transaction;
➡️each party’s promises as to its future performance;
➡️each party’s rights;
➡️the events that must occur before each party is obligated to perform;
➡️each party’s discretionary authority;
➡️how the contract will end, including the events that constitute breach and the remedies for breach;
and
➡️the general policies that govern the parties’ relationship.

✨These rules are the parties’ private laws, which the courts will enforce, subject to public policy exceptions found in statutes and common law. Indeed, commentators speak of contracts as private law. They also refer to them as planning documents. Unlike litigation, which looks back in time, contracts look forward to the parties’ future relationship and reflect their joint plans.

✨A contract also helps the parties to problem solve. Often parties will have the same goal but differ as to how to resolve a specific business issue.

✨A well-written contract can bridge this difference, giving each party enough of what it needs to agree to the contract.

To be continued!
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LEGAL ENGLISH: What is a covenant?

✨ Quora answers ✨

In its broadest sense, a covenant is a promise, agreement, or contract between two parties. As part of the covenant, the two parties agree that certain activities will or will not be carried out.

Covenants in finance most often relate to terms in a financial contract, such as a loan document or bond issue stating the limits at which the borrower can further lend. Covenants in religion often convey the binding relationship between a deity and humanity.

➡️Covenants are agreements between multiple parties that create a legally binding agreement on how each party is to perform.
➡️Covenants can either promote activity to occur (positive covenant) or disallow an event or condition (negative covenant).
➡️Debt covenants are most common, as they place financial covenants on the borrower and lender as part of the loan agreement.
➡️Covenants are legally binding clauses, and if breached will trigger compensatory or other legal action.
➡️Many sectors like finance, real estate, law, and religion have covenants, though it is used in many different contexts across each group.

Regarding business, covenants are most often represented in terms of financial ratios that must be maintained, such as a maximum debt-to-asset ratio or other such ratios. They cover various aspects, from minimum dividend payments to working capital levels. If a covenant is broken, the lender can call back the obligation or reduce risk. There are two primary types: affirmative and negative covenants, and a third type, financial covenants, sometimes separated into its own category.

Types of Covenants
Different industries and sectors have different types of covenants. In general, it’s pretty common to see both positive and negative covenants across different industries.
➡️Debt Covenants
➡️Property Covenants
➡️Law Covenants
➡️Religious Covenants

Check out our video: https://www.youtube.com/watch?v=zPV_97cGVNs&t=9s

Read more about Implied Terms In A Contract: https://blog.seocopywriting.ro/2024/11/08/what-are-implied-terms-of-the-contract-and-its-examples/

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