What Is a Condition Precedent Legal Definition and Examples

A condition precedent is a condition or event that must occur before a contract is considered in effect or obligations are expected of either party.

Key Takeaways:

– A condition precedent is a stipulation that defines conditions for progress or execution of a contract.

– Condition precedents are common in wills and trusts.

– In business contracts, condition precedents dictate the handling of different activities.

Condition precedents may also exist during the life of a contract. For example, in real estate, a mortgage contract requires an inspection to assess the property’s condition and value before taking effect. Condition precedents are also common in wills and trusts, where money or property transfers occur after certain stipulations are met.

In some cases, conditions precedent may be waived if they are not related to the contract’s subject matter. For instance, a subject matter expert hiring a ghostwriter to write a book may require the writer to not perform household duties during the writing period. However, if the writer successfully produces the final deliverable, the non-performance condition can be waived.

The opposite of a condition precedent is a condition subsequent, which defines conditions for contract termination.

Examples of condition precedents in individual and business contracts include:

– Estate assets held in trust with disbursements based on milestones such as education levels, having children, or buying a home.

– Business contracts with arbitration clauses before seeking litigation.

– Hiring contracts with guidelines for compensation and relief.

– CEO contracts with conditions for earning bonuses and salary increases based on company performance.

– Retirement terms with specific work requirements for pension payment eligibility.

– Merger and acquisition deals with conditions for payout terms, such as achieving sales targets or product results.