A provision in a contract under which a party agrees to perform (an affirmative covenant) or abstain from performing (a negative covenant) a particular act. Depending on the nature of the agreement, these provisions may be set out in specific sections entitled affirmative covenants, negative covenants, and financial covenants.

A breach of a covenant entitles the other party or parties to the agreement to exercise certain remedies, which may include termination of the agreement or, in the case of the loan agreement, acceleration of the loan.

For a discussion of covenants in the context of a loan agreement and a lender's rights in the event of a breach of these covenants, see Practice Notes:

In the context of a Texas oil & gas lease, if an oil & gas lessee breaches a covenant, it becomes liable to the lessor for damages and in extraordinary circumstances, the remedy of a conditional decree of cancellation. A breach of a covenant would not result in the automatic or elective termination of the lease as distinguished from a special limitation and a condition subsequent.

For more information on covenants in an oil & gas lease and the lessor's rights in the event of a breach of these covenants, see Practice Note, Oil & Gas Leases: Overview.