Covenants and Contracts are They Different?

May 12, 2017

A Covenant is Not a Contract

Webster’s notes that a contract is “an agreement between two or more people to do something, a formal agreement enforceable by law.” Legal experts tell us that contracts involve an offer, acceptance, a promise to perform, a promise to pay for performance (what experts call consideration) and a time period by which performance must be completed. Terms and conditions in a contract dictate the details of both performance and consideration. What I find interesting is that the same dictionary defines a covenant as a form of a contract. Webster’s says it is, “a binding and solemn agreement to do or keep from doing a specified thing, a compact, a formal contract.”

I believe the definitions are similar because we’ve lost the language of covenant in our society. There are lots of reasons for this, but suffice it to say that covenants are quite different than contracts. They’re far more complex and demand more interpersonal commitment but they also promise more benefits than a contract does.

Contractual Limitations

By illustrating differences here, I’m not suggesting that contracts are inherently bad. On the contrary, contracts are an integral part of business in companies and nonprofits. However, considering the frequency of their use, it’s important to understand contractual limitations. First, they encourage people to negotiate terms based on their own self-interest. Consequently, as the contract is fulfilled, each party tends to evaluate value in the relationship based primarily on the performance of the other party. Second, if one party believes his or her self-interest is not being served, then that constitutes justification for either breaking or renegotiating the contract. Finally, a relationship defined solely in contractual terms can and often does breed mistrust, commodification of relationships and commitment only to self.

As we’ve seen in case after case, when trust is missing in relationships, contracts quickly deteriorate. In fact, most lawyers freely admit that for a contract to work, it has to be supported by an underlying basis of “good faith.” That “good faith” is really the foundation of a covenant.

In contrast to a heavily contractual environment that commodifies and mistrusts people, covenants assume good faith on the part of everyone involved. This is not to suggest that leaders should be naïve in their relationships. Certainly, at times there will be individuals who don’t operate in good faith, and it’s necessary to deal with those “bad faith” people appropriately. That said, it’s important to note that a few people dealing in bad faith, doesn’t justify being guarded with everyone.

Trust is the Key

However, dealing in good faith requires a certain amount of trust. For relationships to work that trust must be embraced by everyone. There simply can be no good faith and therefore no covenant if there is no trust. Consider the results of a marriage in which the partners don’t trust each other. It’s bound to set up anger, frustration, jealousy and eventually a breakup. While we understand the results of mistrust in marriage, many people lack that same understanding in a contract-laden business or nonprofit environment.

Thus, while contracts are binding legal agreements, covenants are binding and committed relationships. Contracts are bound by law, and covenants are bound by the character, values, and mutual goals of the people involved. I believe the failure of our society to differentiate between the two concepts contributes heavily to our leadership crisis. True, in some ways covenants are far more demanding on relationships than contracts, but they are also far more flexible, powerful and productive than contracts. In fact, as fundraising consultants, we encourage our clients to strive for covenant relationships with donors.

So what does this all look like in daily life? That’s what we’ll discuss next week.

“I really support The Covenant Group’s strategic planning process because their approach encourages staff-based support with board buy-in, and I felt that was important given what we were trying to achieve. The outcome is an effective plan that builds consensus and provides a clear sense of direction.”
- Jennifer Scott, Director of Development - The Cabbage Patch Settlement House

“The Covenant Group is highly competent, very experienced and knowledgeable. They provided a broad perspective by equipping us with useful data…and best practices in the field. All in all, they are excellent.”
- Dan Jones, CEO - 21st Century Parks

“The campaign has truly been a miracle. People were committed from the beginning, but…even raising $650,000 seemed like a stretch. To nearly double that amount is incredible! When the plan they developed allows you to hit a goal like that, it builds such a sense of community. The momentum built by the campaign is spilling outside the walls of our church and benefiting others in the process.”
-Father John Hollowell - Annunciation of the Blessed Virgin Mary Catholic Church

“For those of us who don’t do this everyday, The Covenant Group instilled confidence in us. They helped us get through the fear and apprehension by providing us with a process, training and motivation. They taught us and helped us plan in a way that was for the better. We have built lasting relationships with donors and we will continue to steward these relationships long into the future.”
- Sue Finke, Director of Institutional Advancement - Covington Catholic High School

“No one anticipated we could raise this amount. Even the Archdiocese is surprised. The funds raised represent about 15 times our annual giving. But it’s not just the financial results. People stand around talking more than they did before the campaign. There is also a renewed and energized spirit among the parishioners. It’s the most exciting thing to happen in our parish in the last 100 years.”
- Gary Libs, Campaign Co-Chair - St. Mary of the Knobs Catholic Church

“The Covenant Group’s process involved a lot of people in our congregation doing small tasks … that built ownership. They took our vision and put it into a concrete plan. They helped us understand the importance of making our vision clear and laid out the steps to make the vision a reality. Their process built consensus and showed people how they could help. Their methods are based on a solid theological foundation that includes key documents, prayer support, and requisite training … all of which were invaluable.”
- Daniel Montgomery, Pastor - Sojourn Community Church

“Everything The Covenant Group did to help us…in the initial stages was helpful…the development of the case statement; our materials; the training of our Board members; strategies; all these steps laid the foundation for eventual success. They brought such a high level of professionalism, a wealth of experience and a strong track record of integrity and success… just being associated with The Covenant Group helped us.”
- Nancy Doctor, Development Director - Wellspring

“The structure The Covenant Group provided was excellent. It allowed our members to use their God-given talents to benefit the church community They helped us develop a plan and identify key leadership candidates to chair the effort, as well as engaging between 80 to 100 people to carry out the work of the campaign. It was truly a whole congregation effort and The Covenant Group helped facilitate that. They helped us reach our full potential as a congregation.”
- Ron Poisel, Pastor - Christ Lutheran Church

Covenants and Contracts are They Different?

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