Assignment task:
Covenants:
A covenant is a promise to do or not to do something.
It creates a duty to perform if a contract has been formed. The duty to perform is sometimes called an obligation.
Consider a transaction in which the buyer hopes to acquire a lease for property that the seller uses in its business operations. To effect this acquisition, the seller must assign its rights under the lease to the buyer, but the seller's lease prohibits it from doing so. Therefore, the buyer insists that the seller must promise to obtain the landlord's consent to the assignment.
Review the following covenants and see if you can determine how the risk allocation shifts depending on the degree of the seller's obligation.
Version 1 Consents. The Seller shall obtain the consent of Landlord Corp. to the Seller's assignment of the Lease to the Buyer.
Version 2 Consents. The Seller shall use commercially reasonable efforts to obtain the consent of Landlord Corp. to the Seller's assignment of the Lease to the Buyer.
Version 3 Consents. The Seller shall use commercially reasonable efforts to obtain the consent of Landlord Corp. to the Seller's assignment of the Lease to the Buyer. For purposes of this provision, the Seller is deemed to have used its commercially reasonable efforts if it offers Landlord Corp. at least $10,000 as an inducement to consent to the assignment.
Version 4 Consents. The Seller shall request that Landlord Corp. consent to the Seller's assignment of the Lease to the Buyer.