Define Condition Precedent: Everything You Need to Know
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. 3 min read
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.
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:
- The condition of the home is assessed.
- Using this assessment, the value of the property is estimated.
- 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.
If you are trying to define condition precedent and need help, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.