Implied Covenant

Definition

An Implied Covenant is an obligation or promise that is not expressly stated in a contract but is assumed to be included based on the nature of the agreement and the parties' intentions.

Purpose

Implied covenants ensure that contracts are executed in good faith and fair dealing, filling in gaps where explicit terms are missing to reflect the parties' true intentions and expectations.

Examples of Use

• The implied covenant of good faith and fair dealing in employment contracts, ensuring neither party acts in a way that unfairly disadvantages the other.
• Implied warranty of habitability in rental agreements, requiring landlords to maintain livable conditions.
• Implied covenant in property sales, ensuring the seller has the right to transfer ownership and that the property is as described.

Related Terms

• Good Faith: Honest intent to act without taking an unfair advantage.
• Fair Dealing: Engaging in transactions in an honest, fair, and ethical manner.
• Express Covenant: A promise explicitly stated in a contract.

Notes

Implied covenants are crucial for maintaining fairness and integrity in contractual relationships, ensuring that all parties act according to the intended purpose of the agreement.