restrictive covenant

Definition

A clause in a contract that requires one party to do, or refrain from doing, certain things. Often, a restriction on a borrower imposed by a lender. also called covenant.

Use this term in a sentence

The restrictive covenant was a necessary clause as the employee had special power that we needed to ensure would not be used against us.

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When Zoey was taking out a loan from the new bank, they placed a rather detailed restrictive covenant in front of her in case she consider breaking any of the rules of the agreement.

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Bonds or loans that contain restrictive covenants may be more attractive than those in their rating category that do not, as the covenants detail the purpose of the funds, and may add a level of safety.

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affirmative covenant debt limitation