Covenantee: Definition, Example and Related Terms
What is a Covenantee ?
A covenantee is a person or entity (like a business) that receives a promise or agreement from another party, called the covenantor. This promise is usually in the form of a contract. In simpler terms, if you were to promise your friend that you would bake them a cake and they agree, your friend becomes the covenantee as they are the one receiving the promise. In the world of business, the covenantee can be a company who gets a promise from another business to deliver certain goods or services.
Example(s)
Scenario Description A software development company promises to develop a custom CRM software for a client within a stipulated time frame. In this example, the client is the covenantee. The software development company (the covenantor) has made a promise (the covenant) to develop and deliver a specific product within a certain time. The covenantee has the right to expect the covenantor to fulfill this promise, and can take legal action if the covenantor fails to do so. A manufacturer enters into an agreement with a distributor, promising that they will not supply their products to any other distributors in the same region. Here, the distributor is the covenantee. The manufacturer (the covenantor) has made a promise (the covenant) to restrict their supply to the covenantee alone in that particular region. This gives the covenantee exclusive rights to distribute the manufacturer's products in that region, potentially giving them a competitive advantage. Should the manufacturer break this promise, the covenantee can seek legal remedies.