What Is a Condition Precedent?
A condition precedent is an event or requirement that must occur or be fulfilled before a party’s obligation under a contract becomes effective. In other words, it's a prerequisite that triggers the duty to perform.
These conditions are commonly found in real estate transactions, employment agreements, financing deals, and insurance policies.
Legal Significance
Conditions precedent play a critical role in risk allocation between contracting parties. They allow one or both parties to avoid performance if certain agreed-upon events do not happen.
If a condition precedent is not satisfied, the related contractual obligation typically does not arise—and failure to meet it is not considered a breach of contract.
Common Examples
Condition Precedent vs. Condition Subsequent
While a condition precedent must occur before an obligation arises, a condition subsequent terminates an existing duty once it occurs.
- Precedent: “You get paid after you submit the report.”
- Subsequent: “Your license remains valid unless you violate the code.”
Best Practices for Drafting
- Clearly define the condition in writing.
- Specify who is responsible for fulfilling it.
- Include deadlines or timeframes where applicable.
- Avoid vague language like “reasonable efforts” unless defined.