Conditions Precedent under Contracts
📘 What Are Conditions Precedent in Contracts?
A Condition Precedent is an event or action that must happen before a party to a contract is required to do something (like perform an obligation, make a payment, or transfer ownership).
If the condition precedent does not happen, the associated obligation doesn’t arise. The contract may not take full effect until the condition is met.
✅ Key Features of a Condition Precedent
Future Event
It’s something that is expected to happen in the future, not something that has already occurred.
Linked to Performance
The party’s duty to perform (such as paying money, delivering goods, or starting work) is dependent on the condition being fulfilled.
Suspensive Effect
The condition suspends the contract (or parts of it) from being enforceable until it is fulfilled.
Usually Expressly Stated
Conditions precedent are often written into the contract to make it clear what must happen before duties kick in.
🔁 Example Scenarios
📌 Example 1: Real Estate Contract
A buyer agrees to buy a house, subject to getting a mortgage.
The buyer does not have to pay or close the deal unless the mortgage is approved.
Getting the mortgage is the condition precedent.
📌 Example 2: Employment Contract
A company offers a job to a candidate, conditioned upon passing a background check.
The employment offer doesn’t take full effect until the check is cleared.
Passing the check is the condition precedent.
📌 Example 3: Supply Agreement
A supplier agrees to deliver goods only if the buyer secures an export license.
The supplier’s obligation depends on the buyer getting the license.
The export license is the condition precedent.
🧩 Why Use Conditions Precedent?
Risk Control
Parties can protect themselves from being obligated to perform if certain crucial steps aren’t completed.
Clarity
Everyone knows what must happen before the contract "activates".
Staging
Helps in large or complex contracts where multiple steps need to occur in order (like government approvals, financing, or inspections).
🔄 What Happens If the Condition Is Not Met?
If the condition precedent fails or doesn’t occur, the party relying on it is not obligated to perform.
The contract may not take effect at all, or certain obligations may simply never arise.
Sometimes, contracts include a deadline by which the condition must be met—if it isn’t, the contract may expire automatically.
🆚 How It Differs From Other Conditions
| Type of Condition | Description |
|---|---|
| Condition Precedent | Must happen before performance is required. |
| Condition Subsequent | Terminates an obligation after it has begun, if a certain event occurs. |
| Concurrent Condition | Both parties must perform at the same time. |
📝 Drafting Tips
Be specific: State exactly what the condition is and how it will be satisfied.
Set deadlines: Include a time frame, so parties aren’t waiting forever.
Clarify what happens if it's not met: Does the contract end? Does a party lose a right?
🧠 Summary
A condition precedent is a key contractual concept that delays the start of a party’s obligations until something specific happens. It's a way to build safeguards, timing, and flexibility into agreements, especially where outside factors or approvals are involved.
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