What Is a Condition Precedent?
A condition precedent is an event or requirement that must occur or be fulfilled before a party is obligated to perform under a contract or legal agreement.
In simpler terms, it’s a “first this, then that” rule built into contracts to manage risk and sequence obligations.
Common Examples
Real Estate: A buyer’s obligation to purchase a home may be subject to securing financing—a classic condition precedent.
Employment Contracts: A job offer might be contingent upon passing a background check or drug test.
Construction Projects: Payment to a contractor may only be due after inspection and approval of completed work.
Why It Matters
- Protects parties from premature performance
- Clarifies the order of obligations
- Reduces disputes by setting clear triggers
- Enforceable in court if properly drafted
Condition Precedent vs. Condition Subsequent
While a condition precedent must happen before an obligation arises, a condition subsequent terminates an existing duty once a specified event occurs.
Example: An insurance policy remains valid unless the insured commits fraud (a condition subsequent).