Key Takeaways

  • A condition precedent is a specific event or action that must occur before a contract becomes enforceable or before a party’s obligations take effect.
  • These conditions can be express (clearly stated in the contract) or implied (understood by law or conduct).
  • Multiple conditions precedent may exist within a single contract, and they can relate to various obligations, such as payment, delivery, or transfer of rights.
  • Failing to meet a condition precedent generally means no contractual duty arises — the agreement remains non-binding until the event occurs.
  • Courts interpret condition precedent clauses strictly; parties must draft them clearly to avoid disputes and ensure enforceability.

You can define condition precedent as a contract stipulation. However, for a condition precedent to be valid, it must meet several important requirements, which is why it's a good idea to examine this issue in closer detail. 

Definition of a Condition Precedent

Contracts can include a variety of stipulations. Some of these stipulations are what is known as a condition precedent. A condition precedent can either be implied or expressly stated in the terms of the contract. 

These stipulations also have two important characteristics. First, one party must fulfill their contractual obligations before demanding the same of the other party. Second, a specific event must take place before a party is granted a performance right or will have the ability to sue the other party for damages.

A good way to understand a condition precedent is an event that triggers something else to occur. For example, if you uphold your part of the contract, the other party will then be required to fulfill their responsibilities.  When included in a contract, a condition precedent is a requirement that must be met before the contracted parties will be required to complete their obligations.

As with most legal terms, it can be difficult to understand condition precedent. Basically, a condition precedent is a specific event that is listed in a contract. Before this event takes place, the contract is not in effect, and the parties are not obligated in any way. However, after the event, the requirements of the contract must be performed. 

Many contracts will include a single condition precedent. However, it's also possible for multiple condition precedents to take place over the life of the contract. These conditions will usually state that if an event occurs, then another event or action must take place. If for instance, you complete a project for someone, they will then be required to pay you for your services. Your completion of the project would be the condition precedent. 

Key Features and Legal Requirements

A condition precedent is more than a mere contractual clause — it is a foundational requirement that determines when a contract becomes binding or when obligations under it are triggered. To be valid and enforceable, a condition precedent typically must meet several legal and practical requirements:

  • Clarity and specificity: The condition must clearly define the event or circumstance that must occur before obligations arise. Ambiguous language can lead to disputes over whether the condition was fulfilled.
  • Legality: The condition must not require an illegal act. If a condition precedent calls for something unlawful, the entire contract could be void.
  • Possibility: The condition must be possible to fulfill. If the event is impossible from the start, the agreement might be deemed void or unenforceable.
  • Timing: The condition should specify a clear timeframe, either explicitly or implicitly. If the condition is not met within the agreed period, the parties’ obligations may never become effective.

Condition precedents are frequently used in commercial agreements, real estate transactions, mergers and acquisitions, wills and trusts, and insurance contracts. In each of these, the clause serves as a safeguard — ensuring that performance is only required once certain prerequisites are satisfied.

Express vs. Implied Condition Precedent

Conditions precedent can be classified as either express or implied, and understanding the distinction is crucial:

  • Express condition precedent: These are explicitly stated within the contract. For example, a clause might state that “the buyer’s obligation to purchase the property is contingent upon securing financing from a recognized lender.”
  • Implied condition precedent: These are not directly stated but are inferred from the contract’s nature, context, or the parties’ conduct. Courts may imply such conditions to give effect to the parties’ intentions.

While express conditions offer more certainty and are easier to enforce, implied conditions often arise in situations where the parties assumed certain events would occur before performance is required.

Examples of Condition Precedent

Real estate contracts will almost always include a condition precedent. For instance, in a mortgage contract, there can be a condition precedent related to the sale of a home. This stipulation could state that the condition of the home must be assessed to determine the property's value. After this inspection has taken place, both the lender, and buyer must agree to the assessment and value estimate before the mortgage contract will be binding.

In this example, there are three steps that must occur before the contract goes into effect:

  1. The condition of the home is assessed.
  2. Using this assessment, the value of the property is estimated.
  3. Both parties in the contract, the lender and buyer, agree to the estimate.

Virtually every type of contract can include a condition precedent. It can be very common, for instance, to include condition precedents in trusts and wills. These contracts are used to pass on property or money to a person's heir, and when a condition precedent occurs, the inheritance will only be transferred after a specific event has taken place.

As an example, let's assume that you're a teenager who is named in a relative's will. Since you are young, your relative may add a condition precedent to their will that you must complete a college degree before you receive your inheritance. Other condition precedents that can be added to a will or trust include requiring the heir be a certain age before receiving their inheritance or getting married before the trust will be executed.

Essentially, when a contract stipulates that an event must occur before the contract takes effect, it is a condition precedent. However, if you want to add one of these stipulations to a contract, you must be certain that the precedent is legal. If a condition precedent requires illegal actions, the contract would not be valid.

Condition precedents can also be used in deeds to real property. When these stipulations are including in a deed, an event or action would need to take place before the title would be transferred to another person. Imagine that a ship arrives in a port and you agree to purchase the freight and also unload it from the ship. You can include a condition precedent in this agreement that when your daughter marries, the title to the freight that you have purchased will be transferred to her.

Common Uses in Contract Law

Condition precedents appear across a wide range of legal contexts. Some of the most common examples include:

  • Real Estate Transactions: A buyer’s obligation to purchase property may depend on securing mortgage financing or receiving a satisfactory property inspection report.
  • Insurance Contracts: Coverage might only begin once the policyholder pays the first premium or submits required documentation.
  • Mergers and Acquisitions: Completion of a transaction may hinge on obtaining regulatory approvals or shareholder consent.
  • Employment Agreements: A job offer may be contingent upon the candidate passing a background check or obtaining a professional license.
  • Trusts and Wills: Beneficiaries may receive assets only if they reach a certain age, graduate from college, or fulfill other specified conditions.

Failure to Meet a Condition Precedent

If a condition precedent is not satisfied, the parties are typically not obligated to perform their contractual duties. The contract remains non-binding or unenforceable until the triggering event occurs. In some cases, the agreement may expire or terminate if the condition cannot be met within a reasonable or specified period.

However, if one party wrongfully prevents the condition from being fulfilled — for example, by failing to cooperate with necessary approvals — courts may treat the condition as satisfied to prevent unjust enrichment or bad faith conduct. This legal principle underscores the importance of good faith and fair dealing in contract performance.

Frequently Asked Questions

  1. What is the difference between a condition precedent and a condition subsequent?
    A condition precedent must occur before a party’s duty arises, while a condition subsequent can terminate an existing obligation if a specific event happens after the contract takes effect.
  2. Can a condition precedent be waived?
    Yes. If the condition is included for the benefit of one party, that party may waive it, either expressly or through conduct, provided it does not harm the other party’s rights.
  3. What happens if the condition precedent is impossible to fulfill?
    If the condition is impossible from the outset, the contract may be void. If it becomes impossible later, the contract might be discharged, and neither party is required to perform.
  4. Do courts strictly enforce condition precedent clauses?
    Yes. Courts typically interpret them strictly according to their wording. Ambiguous clauses are construed based on the parties’ intent and surrounding circumstances.
  5. Are condition precedents common in commercial agreements?
    Very. They are frequently used to manage risk and ensure that performance occurs only after essential events — such as regulatory approval, financing, or due diligence — are completed.

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