A condition precedent is a legal term that refers to a condition or event that must take place before parts or all of a contract will be considered valid and in effect. If the condition precedent of a contract is not met, the parties involved may not be obligated to fulfill the contract.
Most contracts will include a single-condition precedent. In any case, the number of condition precedents is generally not limited, so there may be multiple in a single contract.
Condition precedents are just one of the many stipulations that you may come across in a contract. To better understand how condition precedents work, you can define them as a certain event that triggers another event to take place. Simply put, condition precedents must be satisfied before the contracted parties are legally obligated to fulfill their obligations.
Although some condition precedents can be implied, most should be explicitly stated in the terms of the contract.
Many homeowner insurance policy contracts have condition precedents. For example, assume that the insurance policy expresses that the insurer must compensate the insured if his or her home is destroyed by a tornado. In this case, the tornado would be considered the condition precedent. Therefore, the tornado must occur in order for the insured to get paid out by the insurance company.
You may also stumble upon a condition precedent in a will or trust. In these cases, the contract may stipulate that the transfer of certain assets, such as money or property, should only occur after certain conditions are met. For instance, a condition precedent may state that an heir needs to reach a certain age before he or she can receive the rights to another individual’s real estate.
Lastly, it is not uncommon to come across a condition precedent in business law contracts. Some contracts may include condition precedents that require a company to seek mediation or arbitration before heading to a formal court setting in the event that a legal issue arises within the business.
In some cases, condition precedents may be waived. This typically occurs when the conditions are not related to the subject matter of the contract. A famous example of waiving a condition precedent can be found in the case of Clark v. West, where an individual hired an author to write a series of books. The contract between the two parties included a condition precedent stating that the writer must abstain from consuming alcohol during the duration of the contract. When the author chose to drink, the individual refused to pay him for his work. The author took the case to court, where it was ruled that the author entered into the contract to write books and not to abstain from drinking. As a result, the writer won the case and ultimately received his compensation.
Get in touch with one of our top attorneys if you are interested in adding a condition precedent to your contract. Moreover, our professional attorneys can provide valuable guidance when it comes to determining whether or not condition precedents are binding.