1. Condition in Contract Law
2. Three Types of Conditions
3. Conditions, Limitations and Covenants: What’s the Difference
4. Events Foreseen by Conditions in Contract Law

Condition in Contract Law

A condition in contract law spells out the obligation to fulfill duties between parties in a contract. They are standard in valid contracts and, in fact, the essence of any agreement between two or more parties to a sale, real estate transaction or agreement to provide a service.

The simplest way to think of a condition in contract law is found in the terms “If…then”. “If” one party fulfills an obligation as contained in the agreement, “then” the other party to the agreement must fulfill their obligation. It’s more than a promise because of the obligation it creates. For instance, if I tell a neighbor I’ll watch their cat, that’s a promise. If my neighbor and I agree that if I watch his or her cat then they will pay me $10, it’s a condition of a contract.

Law.com defines a contract as “an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.” It may be a written or oral agreement between two parties. Regardless of type, each is legally binding and extremely common and necessary in the business world. They act as a guarantee that obligations are fulfilled and, if not, provide opportunities for recourse.

Three Types of Conditions

Three types of contract conditions exist, defined by the point in time that conditions must be met. These are:

  • A condition that must be satisfied before, or precedent, to the obligation of the performing duty to act. An example of this condition in contract law would be that I don’t have to pay someone to shovel snow from my driveway until it has snowed and the party has shoveled the snow. In this case, the condition is suspended because I don’t have to pay unless it snows.
  • A condition that must be satisfied during, or concurrent to, the duty of the performance of the act. This might come into effect if I know it will definitely snow and will pay someone a set fee per month to shovel the snow, regardless of how often the service is required.
  • A condition that can be satisfied after, or subsequent to, the performing party beginning to meet its obligations. An example might be if I employ someone to shovel the snow in my driveway until they receive an offer from another party that is at least 35 percent above the rate I am paying them.

As you can see, conditions are established for events that may or may not happen sometime in the future. Therefore, contracts often contain conditions that can be modified, or even rescinded, if both parties allow for certain contingencies in the event that obligations cannot be met due to established circumstances.

Conditions, Limitations and Covenants: What’s the Difference

In terms of business law contracts, there is often confusion about the difference, in the legal sense, between conditions, limitations and covenants.

  • Conditions. As described above, a condition relies on two or more parties satisfying obligations to each other before it is achieved. There may or not be a time period during which the obligations must be met.
  • Limitations. In so far as limitations are applied in a contract, they are always based upon an established time period after which a party may not be liable to fulfill an obligation, regardless of whether other conditions of the contract have been met.
  • Covenants. Quite simply, a covenant is a contractual promise. It is not dependent upon conditions being met between two or more parties, only obligations made by one party to a contract.

Events Foreseen by Conditions in Contract Law

Conditions in contract law can provide for events that may be contemplated by the parties to the agreement. These could include:

  • Conditions that prevent the parties from taking specified actions, such as not allowing a party to the contract to transfer property (real or intellectual) to a competitor of a party.
  • Conditions that hold a party harmless due to an unfortunate, unpreventable event (often called an “Act of God”).
  • Conditions that call for remedies for events that, although unfortunate, could have been expected due to economic, political, or environmental conditions existing at the time a contract is signed.

It is important for entrepreneurs and small business owners to consider all the ramifications of the conditions that are components of a contract. Contract law is a specialized practice, and it is often wise to seek out the counsel of contract law attorneys before entering into any legally binding document.

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