Surplus or Excess Funds After Foreclosure

The typical foreclosure will not result in an amount above and beyond that which is owed to the lender, and the defaulted borrower may be on the hook for the deficiency. New laws allow the deficiency of the borrowers to be limited to the difference between the amount of the sale and fair market value, not the amount of the loan. It is in deficiency situations that the recommendation is to negotiate a short sale with the lender, which will release the borrower from a deficiency. However, in some situations, such as a long term loan which is mostly paid off or a foreclosing junior lien, there may be funds left over from the sale, which under the typical deed of trust must be returned to the defaulted borrower.

The primary document which by Texas law governs foreclosures and the distribution of funds by a trustee or substitute trustee is the deed of trust. In the standard deed of trust the funds obtained from a foreclosure sale are to be distributed first to cover the costs of foreclosure and the trustee’s fees. The fees are required to be reasonable, which means the trustee should have a reasonable fee policy and should have documented all actions undertaken in the foreclosure process. There are no supreme court cases or laws regulating the reasonableness of trustee fees, however, one case has rejected a 10% fee because the trustee failed to properly account for the work performed. Another case permitted a 5% fee as reasonable, so the assumption is that a fee should be between 5% and 10% and the services performed should be well documented to be permissible.

Next the deed of trust should require the repayment of the foreclosed loan. There are no legal requirements for notification of either junior or senior lien holders, however, most trustees will probably notify junior lien holders at least, so that a future claim against the trustee does not materialize, for collusion with the foreclosing lender, for example. The trustee may pay off the junior liens on its own, in order of priority. If a conflict exists between junior lenders regarding priority, the trustee will likely interplead the funds into the registry of a court, and allow a judge to decide to whom the money belongs, and in what order. Strong case law dictates the trustee may not pay off senior liens without the permission of the defaulted borrower. There is no reason to do so, since the prior lien is still attached to the property, and the borrower is still on the hook for it.

Finally, the left over funds, after paying the junior liens should be distributed to the defaulted borrower. This process typically takes some months to work through the banking and trustee/attorney web of intrigue and indifference. Demands and communications with the trustee should be made early and frequently, with all demands sent certified mail and calls well documented, in order to prod them to conclude the process of returning the funds. Typically, litigation should not be required, because the case will probably never make it to trial, and result in needless legal expenses. The law in this area is relatively well settled, and only in rare cases will a dispute result in a prolonged court battle. Typically, in case of a dispute between claimants, such as multiple defaulted borrowers each claiming a share, the trustee will simply interplead the funds and let a court decide who gets paid what.

Copyright Issues for Former Band Members

What happens if a musician co-wrote a song or multiple songs with his band after which point the group relationship is terminated and one or more of the musicians part ways? Well, this issue should ideally be resolved in a written document each serious band should begin its career with, simply called a Band Agreement. This document spells out the respective interests in all copyrights, the division of financial rewards, and numerous other issues, such as the band’s outside representatives, the band members’ responsibilities (professional equipment, showing up on time, etc.), touring matters, practice matters, and dispute resolution issues. Such an agreement is fundamental to the smooth functioning of a cohesive musical unit that purports to make a career out of writing and performing music. A band without such an agreement, is and likely will remain an amateur performer, and is likely to experience a rocky career.

If no Band Agreement exists, the default copyright laws state that the creators own the composition in equal shares, but this applies only to copyrightable portions. Drum beats are not copyrightable; nor are chord progressions. Therefore, whoever writes the original music and lyrics of the composition will share in the copyright. If the bass player wrote the main melody or main hook of the song, that is copyrightable, and if the guitarist and vocalist crafted the rest of the song, then three individuals will share the copyright ownership equally, and the federal copyright registration will name three owners. If the bassist is thereafter kicked out of the band, or perhaps simply parts ways for greener pastures, the band will do well to obtain a copyright assignment(s) from that party, who will probably and properly demand some form of payment, either flat or percentage, and perpetual credit as songwriter, though everything is negotiable. The amount of the payment depends on the band’s star power and potential income that may be generated from the composition(s) in question. Always consult an attorney when selling your intellectual property.

If the band member leaves without signing a copyright assignment and the band decides to record the song anyway, you should be aware that the copyright has already vested in the songwriters, therefore it is irrelevant if the departed member plays on the master recording or not. Or say the group already recorded the tune using the former band member and simply decides to market it by distributing copies on the road or online. Well, the answer is simple: the songwriter royalties due the departed member are 1/3 in the above example; therefore, that person has a right to, and may sue for, that amount as generated by the mechanical reproductions of his composition(s). The royalties are due on printing of the cds, none of them actually have to be sold.  Remember that if the former band member did not perform on the master then he has no ownership interest in it, but only the copyright rights in the composition(s) he co-wrote. Current statutory mechanicals are 9.1c per song for compositions under five minutes, and if the band owns the master recording then that is the amount due to the former band member, per song he has an interest in, and the group keeps and splits the rest. If the master is owned by a label, then all the copyright holders will get equal shares of the mechanicals, while the drummer may get nothing.

If the band is also functioning as its own publishing company, or assigns part of its publishing copyright to a publisher, then the departed group member is also due his share of publishing royalties. For example, if the above band assigns 25% of its publishing rights to a publisher, after the band receives 75% of the publishing royalties, they owe the departed member 25%, and are liable for this amount regardless if the person is a part of the group or not. The publisher attempts to obtain the band revenue other than through cd/internet sales, which are from the master recordings, and such royalties are called mechanical royalties which are typically collected and distributed to musicians by the Harry Fox Agency. So, publishing royalties due the departed band mate are in addition to the mechanical royalties the group obtains.

Confidentiality, Non-Circumvention and Non-Disclosure Agreements

Before a party enters into negotiations or preliminary discussions regarding any potential business transaction, idea or product care must be taken by both sides so that the communications are covered by a thorough agreement which will permit the full disclosure of potentially unique, profitable or secret information without fear of the other side appropriating and using it for its own benefit. If no such agreement exists the potential for litigation rises significantly if in the future one of the parties publically reveals some product or idea which bears a resemblance to that which was discussed previously, even if that product or idea was created without any use whatsoever of any of the information obtained during those prior communications. The disclosing party may reasonably sue and recover damages stemming from the theft of the information with only having to prove that the information was previously provided and thereafter a commercial activity was undertaken by the recipient of that information which created a profit. Therefore confidentiality, non-circumvention, and non-disclosure agreements are highly significant in todays litigious business climate. Don’t make the mistake of discussing any business ideas without a thorough and professionally created contract which will protect both sides.

What should such an agreement include? Of primary importance to the agreement is a clear statement on the topic of discussions in as much detail as possible. Something like “the sale of manufacture, sale and distribution rights to a product which is intended to facilitate the coffee brewing process. The product consists of a plastic base with a metallic cap and two handles (illustrative sketches of proposed product attached in Exhibit A)” is far better than “a new type of coffee brewer.” The product or idea should be identified with as much specificity as possible, this is to protect both parties from any misunderstandings. Variations on the original idea should also be protected from disclosure, so that the recipient cannot claim that the mere modification of the original information will allow it the full rights to market and profit from information it legally owes compensation for.

Another provision of significance is to include a exceptions to the use and disclosure of information previously known, obtained from independent sources or publically disclosed at any time by the provider of the information. This will provide a powerful defense to the recipient if sued, in that showing that the information was already publically disclosed in any manner by the provider or that it was obtained through other independent channels or previously known by the recipient will allow the mitigation or full avoidance of potential damage awards. Another exception should include information whose disclosure is compelled by some governmental or administrative body.

Finally, some specific term to the confidentiality, non-circumvention or non-disclosure agreement should be expressly stated. This puts a mutually agreed upon time frame from which the provider of the information may profit from the idea from any source. A time limit may be any number, from one year to permanent duration as agreed by the parties. It is also advisable to consider limiting the agreement’s application to a certain geographical location, such as a state, a nation or even a continent. This is subject to negotiation and obviously the recipient will want as small a location as possible, while the provider will want the agreement’s geographical application to be unlimited or world wide.

Obviously boilerplate provisions should be included, such as alternative dispute resolution, applicable law, assignability, succession, notices, waiver of any provisions, and the like. These agreements must be reasonable in scope, and are also governed by case law within most states. Please consult competent contract drafting legal counsel for the appropriate conformity to state law and for the creation of a lawfully binding non-disclosure, confidentiality, and non-circumvention agreement.

Parol Evidence Rule and the Merger Clause

The parol evidence rule is a substantive rule of contracts which prohibits the introduction of contradictory extraneous prior or contemporaneous agreements to a written, signed document. This type of rule is essential to the certainty provided by signed contracts, and business could hardly continue to function if any party was free to claim additional terms and seek modification at any time after the contract is signed. This rule means that a party that signed that contract cannot later claim that there exist prior oral, written, electronic or any other type of agreements or statements, which go against the written agreement in some way, and which were not memorialized into the writing. This rule, however, does not prohibit the introduction of evidence which is not inconsistent with the written contract, and does not contradict its terms. This simply means that evidence to show what a particular provision was actually intended to do/mean will be permitted, including statements, writings, etc.

Most agreements will contain what is known as a “merger” or “integration clause” which simply expressly states that no outside agreements, promises, or statements have been made other than what is memorialized within the four corners of the document. If an agreement does not contain a merger clause this will make it more difficult to prove merger of all prior agreements into the written contract, however, the presumption of merger exists upon signing, is made stronger by the existence of a merger/integration clause and a few other clauses, and in the final analysis a court will review the surrounding circumstances of the creation of the contract in determining whether or not an agreement is merged/integrated and to what extent.

Basically, the less relevant the existence of contradictory evidence is to the subject matter of the agreement, and if the subject was not addressed in the contract, the easier a time the court will have finding that the parol evidence rule prohibits the introduction of such extraneous contradictory evidence. If the evidence pertains to a highly relevant matter in the agreement, and is not addressed in the contract, or is incompletely/ambiguously addressed, chances are such evidence may be permitted to modify the contract. If the topic is fully and unambiguously addressed then it is likely that parol evidence rule will bar the introduction of extraneous evidence. Point of fact, all agreements drafted by this office will have a merger clause, and it is paramount that it be properly drafted and all encompassing.

There are a few exceptions to this rule, which will actually permit the introduction of evidence showing extraneous agreements: when a writing is incomplete or ambiguous; these are two sides of one coin. As previously mentioned, if there is an important point highly relevant to the subject matter of the agreement and it is not addressed in the agreement, or it is addressed but not fully covered as in the interpretation could go either way, chances are good that parol evidence will be permitted. Fraud, accident of mistake will also permit introduction of outside agreements because proving fraud simply will void any agreement. An accident or mutual mistake need to be proven and the standards are quite high, however, if proven to the requisite standard, a contract will be permitted to be modified. Mistake can be shown in that all parties had no meeting of the minds regarding some provision(s), or that an important provision was left out. If an agreement was subsequently modified or may have been illegal, evidence to show the reasons for modification or illegality may be permitted. Finally, if there is use of customary terms or trade terms which are words of art, meaning they mean specific things in some specific industry, outside of what most people accept their meaning to be, then evidence may be permitted to show what the terms are actually accepted to mean in that industry or what their customary usage is.

Boilerplate General Contract Provisions

The “boilerplate” contract provisions typically form the last section of an agreement, and they are typically dismissed as “housekeeping” of secondary importance. These provisions address issues such as amendments, governing law, waiver of trial, alternative dispute resolution, succession/assignment, notices, counterparts, severability, authority and merger. Dismissing these provisions as irrelevant or unimportant is a serious mistake, and as much attention should be paid to each word of these provisions as to any other portion of the document. Ignoring these sections may result in dire repercussions for one or all parties, for example when one discovers that a dispute must be litigated in another state, or that no litigation may occur until various alternative dispute resolution measures are implemented.

Amendments should only be permitted with mutual approval of all parties, in signed writing, and appended to the original agreement. Non-mutual amendments are commonly used by scam artists, individuals or companies, who intend on using that provision to unilaterally change the terms of an agreement and then attempt to bind the other signer to the changes. Although such provisions are difficult to enforce in court, and it is usually unlikely one will be sued over this type of dispute, it is possible that the threat of suit, and/or an ongoing relationship with the entity or person, will necessitate a greater expenditure as demanded. The fraudster may be counting on the need for the completion of a project or may attempt to intimidate the other side into paying more.

Governing law provisions are relatively simple, and should usually state that state where the agreement was signed, although the parties may agree to use any state’s law to govern the agreement’s terms. If one suspects the agreement may end up in court, that party would do well to demand the governing law to be of his/her own state. If a company or person has reached out to the buyer of goods or services, then certainly the application of the buyer’s state law should govern, and this should be expressed in such a provision.

Typically, severability provisions state that the agreement will survive any state/federal law changes or circumstances nullifying any provision by a governing entity, and remain in force, although without any of the invalid provisions. These provisions are probably in every agreement, and so should be. The only way an agreement can be voided in whole is if the subject matter of the agreement is made illegal or it becomes impossible to complete the performances required under the agreement not due to the fault of a party.

Alternative dispute resolution is becoming commonplace. Nobody wants to spend (tens of) thousands of dollars and wait years to resolve a dispute, but the legal system is a mess, and justice is not even remotely assured. Arbitration, or even better, mediation provides a quick, relatively inexpensive, and less stressful resolution mechanism which places the resolution into the hands of the parties, and should be considered and implemented prior to any litigation being commenced. Although in mediation compromise will result in none of the parties being fully satisfied with the resolution, in litigation, this satisfaction with the resolution will be far less.

Most agreements are not assignable, although this depends on the personal nature of the agreement. If a different and competent party can perform the same or similar class of services or provide the same goods then assignment should be permitted under the right terms, because if a party cannot perform, it should be allowed to attempt to save the contract and satisfy the other party.

Each party should list a good address of record that will be deemed to be the proper location for any important notices given to the other. Notice issues come up occasionally, and providing a valid address can put any disputes as to notices to rest quickly. Each party should have the requisite authority to enter into the agreement, and such an attestation may bind the signer personally if he/she does not in fact have the authority. Although, at times this personal binding of the signer is useless because they may not be able to perform or pay under the agreement as required.

Merger is a topic that has had many dissertations and articles written about it. To sum up, it is a provision which negates any oral statements, promises and agreements, and incorporates or merges them into the final agreement. Therefore, if such promises or statement were not included into the agreement in writing, then they never happened. This is called the “parol evidence rule.” This rule prohibits a party from presenting evidence of promises or agreements contrary or in addition to what is in the written document, unless the agreement is ambiguous or a few other exceptions apply, such as defects in the formation of a valid contract. In short, the moral is: be sure to include all oral promises into the final written document, because more than likely 99.9% of all contracts will contain this provision.

LegalZoom and the Online Legal Services Scam

In centuries past, the legal profession was highly selective about the individuals who were permitted to dispense legal advice. Attorneys were generally regarded as highly competent and generally ethical in providing legal services. This began to change a few decades ago when law schools began to proliferate as lawyer mills and with little interest other than making as much money as possible from naïve college grads who would happily take out hundreds of thousands of dollars worth of loans from the government and private agencies for the promise of a lucrative, exciting, and important profession. In the past few years the legal industry has sunk to a new low when some factions within it began to convince the public that law practice is nothing more than filling in the blanks on forms, and the public bought it; as it did so many other epic con jobs perpetrated by private and government entities.

The proliferation of online discount self-serve legal providers has convinced the public that they are qualified to draft highly significant and specialized legal documentation which could have severe repercussions down the road if not drafted properly and according to the specific situation of the client. Now, anyone with zero legal education could purchase a standard form by filling in the blanks and paying the fee, remain convinced they are protected in a variety of personal and business transactions. For instance, wills, trusts, and business entity formation documents are just a few of those routinely peddled to the unsuspecting masses using a blitzkrieg of marketing hype and empty promises. A simple search of reviews for any of these services will reveal a throng of dissatisfied and angry customers who found their documentation was long delayed, filled with errors, or not produced at all. But this is just the beginning of the potential pitfalls of acting as one’s own legal counsel.

The main consequence of doing one’s own legal work without understanding what a customized legal document must include and exclude is the threat of very significant repercussions long down the road, when Legalzoom or any other online legal services provides no longer have any responsibility for their product. For instance, wills and trusts commonly fail because they are filled with errors and omissions, such as neglecting to list some important piece of property, failing to properly specify an independent executor who is to serve without bond, or a contingent beneficiary/executor, failing to list proper addresses where various parties may be found, and failing to include necessary provisions regarding past relationships. There are also many issues which may arise from improper execution of a will or trust. Trusts fail and are sued regularly, and the creation and maintenance of a trust simply cannot be entrusted to someone who has had a trust created by Legalzoom which then provided a two page instruction sheet on how to manage it. A trust offers no liability protection, and it must only be used for specific situations.

The formation of a business entity is a highly specialized process which requires the understanding of multiple state codes, and it cannot be properly performed by a dilettante who believes the mere registration of the entity with the state will provide all the liability shield protection needed to safely conduct business without risking the owner’s personal assets. This misunderstanding is perpetuated by such online discount services, and it inures to the extreme detriment of their customers. As a final word of caution, if you choose to use such a service to provide you with legal documentation you are doing so at your own peril. This, and many other offices will charge you full fees for fixing, correcting, redrafting or restructuring such documents, as if they are being created from scratch, when they fail to meet your needs and expectations, the discovery of which may come too late to fix the problem. Save yourself the time, stress, and expense and retain a qualified licensed attorney who not only understands the pertinent law, will customize documents to your needs, and be there after the fact to guide you in their application and use.

Escrow Agreements

Escrow agreements are used to safeguard money or property with a neural third party while a transaction is completed. The escrow agent is the neutral party that will hold the property until the transaction is completed or fails and will act according to the terms set forth in the escrow agreement. To be more specific, the escrow agreement will detail the circumstances under which the agent will take and retain the property and whether anything will be done with it while it is stored. The agreement states how the property will be distributed, and finally, the agent’s fees, release from any liability while storing the property, and possibly an indemnification provision for any losses arising out of the storage of the property.

Typically, escrow agents require joint written instructions from the parties, because they agree as to the terms, otherwise a court order may be required, or some sort of neutral dispute resolution procedure. Sometimes, an agent will be permitted to resign if the parties cannot agree to the terms of the escrow agreement. In either case, an agent will be permitted to bring a legal action seeking declaratory relief as to the disposition of any property. Pertaining to the purchase of real estate, the escrow deposit takes place at the simultaneous signing of the contract and escrow agreement, wherein the purchaser deposits the earnest money with the agent until the deal is closed or a certain period of time passes without closing, or the buyer is at fault for the failure to close on the property and the funds are then remitted to the seller. Otherwise, the deal may fail to close through no fault of buyer or seller and the funds or a portion thereof are returned to the buyer. Problems in escrow agreement drafting occur when the terms of the storage, transfer or return of the funds are not made clear to one of the parties, or when certain expenses that the agent expects to have reimbursed, have not been explicitly listed, and the agent is permitted to deduct those expenses from the stored property, and even hold the property as security until the fees are paid.

There are also quasi-criminal escrow services that operate with relative frequency which possess the intent of creating ambiguous escrow agreements and count on the failure of the parties to retain legal counsel to review them. As a result there are various fees tacked on to the agent’s expressly stated fees, which were not expressly disclosed. Sometimes the terms of the agreement permit the agent to sell or otherwise dispose of the held property if it unclaimed for a specified period, or to pay off the fees. In Texas, escrow officers are required to be licensed by the state, prior to which they must be sponsored by another agent, post bond, and undergo a criminal background investigation. The parties should be certain to investigate the license and the commercial status of any escrow company they are planning to deal with, and get the escrow agreement reviewed by a knowledgeable professional.

Starting a Music Publishing Company

Technically, once a musical composition is created and completed, the composer becomes the publisher and the writer. The artist may choose to split this unified ownership bundle into two by selling the publishing part of the copyright to an established publishing company which will then attempt to exploit the composition by collecting royalties in exchange for licensing the music for recording. The split will vary but may be as high as 50/50 between the composer and publisher of all moneys received by the publisher. And when a separate publisher is retained that publisher will engage the services of two types of organizations to collect performance royalties (BMI, ASCAP, SESAC) and issue mechanical licenses and collect those royalties (Harry Fox). Publishers also use their own contacts in the industry to sell synch licenses, and sell the rights to rerecord their clients’ compositions to other musicians.

A composer may create his own publishing company to engage these companies/services on behalf of the composer and keep far more of the royalties. However, an artist should not consider doing this unless he is certain that he can do a better job at exploiting the compositions than an established publishing company. The artist should have some contacts in the industry if he plans on forming his own publishing company. The steps to take in creating a publishing company are quite simple:

1. You will need to have actual music fully recorded and ready to be released.
2. Join one of the performance rights organizations. (BMI, ASCAP, SESAC)
3. Conduct a name check with that company. They will do a search and deny your proposed company name if it is too similar to an existing publisher. Sending the wrong party royalties is very bad for business. The name should be something very unique.
4. Obtain a DBA certificate from your county and open a checking account in the name of the company name that was approved by the performance organization.
5. Transfer the copyright ownership from you personally to the newly formed company. You will need an “Assignment of Copyright” contract between you and your company, and you may wish to re-record the copyright under the new company with the Copyright Office. Please see Circular 12 here:
6. Fill out both writer’s and publishers clearance forms for the performing rights organization you are a member of. If you plan on representing other artists, you will need to register with all three performance rights societies.

Conditions, Declarations, and Discretionary Authority

The final types of provisions which make up most properly constructed agreements are conditions, discretionary authority, and declarations. We will begin with declarations because they are the simplest to understand. Simply put a declaration is a statement of fact as to which the parties agree. It is simple to understand because no rights or remedies are associated with declarations; their breach may not be sued upon. To give an example, all definitions in a contract are declarations; they have no substantive effect on their own. No party promises to do or not do something, and no representation or warranty was made. All declarations will have legal effect in that in the above example, a definition is binding on the contract in question. The definitions were agreed upon, and are to be used in interpretation of the agreement. Some declarations have legal and substantive effect; such as a declaration which states the agreement’s choice of law, i.e. The laws of Texas are to govern the entire contract. Although there are no rights or remedies with a breach of such a provision, it has substantive effect because it establishes a policy which governs the agreement itself.

A condition is a state of facts which must exist before a party is obligated to perform. To be a condition, the event which triggers the performance must not be certain to occur. Therefore, passage of time cannot be a condition. A condition may be created before a right is exercised, or a covenant must be performed. The typical form that conditions take is the “if… then” grammatical structure. For example, “if the inspection is performed within one week of the execution of this agreement, and the results are satisfactory, then the buyer shall purchase the vehicle.” This provision combines a condition with a covenant. Conditions may be ongoing, meaning that a certain state of affairs must exist throughout the duration of the agreement for one party to be required to perform. If the condition is not satisfied at any time, the performing party may choose whether to perform, waiving the condition, or terminate the agreement, or seek any other remedy outlined in the agreement. Some conditions may be worded so that their breach does not terminate the entire agreement, but only cancels one party’s duty to perform some action, and the agreement will otherwise continue.

Discretionary authority grants the holder the choice or permission to act. The holder is not required to exercise the authority granted. Commonly, discretionary authority is granted with a condition preceding it. So, a state of facts must exist before a party may exercise its discretionary authority. For example, in every loan agreement conditions exist which will allow a bank to accelerate its loan such as default, unauthorized assignment of the loan, transfer of title, failure to maintain insurance, pay taxes, etc. In such events, the bank may, but is not required to accelerate its loan. Conditions serve to allocate risk, meaning that discretionary authority should usually not be unlimited and unrestrained in an agreement. Discretionary authority is not the same as a right, because in a right, there is a right to receive some performance and a duty to perform. In discretionary authority there is no right to receive performance, only one party has the authority to act if it so chooses.

Rights and Covenants in Contracts Drafting

These contract drafting terms both essentially mean the same thing, albeit from differing viewpoints. A covenant is simply a promise or an obligation to do or not do something. A contract right is the obligation of the other party to do or not something for the party that holds the right. If there is a duty or obligation to perform then there must a correlative right to receive that performance. A covenant is drafted from the viewpoint of the actor, which a right is drafted from the viewpoint of the recipient. Covenants are correctly drafted using the word “shall” as in “X shall do so and so”, and rights are delineated by various words such as “entitled, is to be, shall receive, etc.” Rights use more passive language and contain inherent ambiguities, thus they are generally to be avoided in drafting. For instance, if one inserts a right into a contract without naming the obligor of that right, then an ambiguity may exist as to which party must perform that obligation.

The remedies for breach of a right or a covenant are essentially the same. The non-breaching party may sue and in some cases seek specific performance, which is an order by a court that a party must perform the obligation specified in the agreement. The measure of damages is the benefit of the bargain, meaning that the aggrieved party is entitled from the party who breached the contract to everything that he would have received, including profits, if the breach had not occurred. If the breach cannot be cured, then the aggrieved party may have the right to void and rescind the agreement.

A breach of a covenant legal action does not require a breach of any representation or warranty, because these are determined to have been breached or not at the time they were made, therefore, if the representations and warranties were true at the time they were made, and a covenant or right was breached at any point in the future then only an action for breach of a covenant or right would exist. To give an example, when selling a vehicle, the seller represents and warrants that the vehicle is pink, which is in fact the case, and furthermore the seller covenants not to change the color of the vehicle before the transfer, while actually painting it blue before delivering it to the buyer, there would only lie an action for breach of covenant and not for breach of warranty or representation because these were true at the time they were made.