What Is a Condition in Contract Law

A condition precedent is an event or state that is required before anything else happens. In contract law, a condition precedent is an event that must occur unless its non-occurrence is excused before the performance of a contract becomes due, that is, before a contractual obligation exists. [1] A condition precedent is when something must occur or a situation must arise before or before a party has an obligation to perform. Procedurally, in the case of a plea for breach of contract, if the contract contains a condition precedent, it is for the applicant to prove that the condition precedent is met. For example: Notwithstanding the previous example, there is generally no obligation to perform a contract unless the express condition is met. However, there are situations where conditions can be excused for the obligation of performance to be present even if the condition is not met. A condition may be expressed between the parties or implied by the nature of the agreement. That is, the parties discuss or include the terms in the agreement or the language or nature of the contract may imply certain conditions of performance. The contract may also contain conditions that must take place simultaneously before one of the parties has a performance obligation. This is often the case when the contract requires simultaneous performance. Most point-of-sale purchases involve an implicit simultaneous performance condition. It is important that entrepreneurs and small business owners consider all the effects of the terms that are part of a contract. Contract law is a specialized practice, and it is often advisable to seek the advice of contract attorneys before finalizing a legally binding document.

A condition in contract law describes the obligation to perform obligations between the parties in a contract. They are the norm in valid contracts and in fact the essence of any agreement between two or more parties to a sale, real estate transaction or service provision agreement. In the real estate sector, a condition precedent is an event in which the acquisition of a property right occurs. If the condition does not occur before a certain time, the condition will fail and the ownership interest will not be acquired. A condition of a contract is an event or action that requires a party to perform an action or service as specified in the contract. Basically, it is a certain qualification that is placed on a promise. Other problems arise when the payment of the contract price depends on a condition. Let`s take this example: in every contractual agreement, each party has a legal obligation – in other words, an obligation – to fulfill.

Failure to comply with these obligations could give rise to civil liability under a right of breach of contract. As a general rule, the courts protect a company from liability if it is closed for economic reasons that are not related to the contract it has with the other party. However, closing to avoid losses of the contract itself does not protect them from liability. The answer to this question depends on the subject matter of the contract. If it is a construction or construction contract or a contract that involves mechanical fitness or commercialization, satisfaction is measured against the appropriate human standard. For example: a subsequent condition excuses the performance of the contract when a future event occurs or a situation occurs. A condition precedent specifies an event that must occur before a person is required to perform the obligations set out in the contract. Should conditions precedent and subsequent conditions be treated equally? What is the rationale for categorizing each type of condition? Practical question: Harold makes a deal to sell his house to Emily. The contract states that Emily is exempt from her obligation to buy Harold`s home if the house does not receive approval from a licensed building inspector. What type of condition is included in this Agreement? In short, if a contract contains a condition precedent, there is no obligation to perform until the condition is met. Once the condition is met, performance is required.

If a contract contains a subsequent condition, there is an obligation to perform until the condition is met. As soon as the condition is met, the obligation to perform ends. If you are sued for breach of your contractual obligations, it may be advantageous to prove that a condition was subsequently fulfilled and that your contractual obligation has therefore been lifted. It is a complete defense that must be broken. As you can see, conditions are set for events that may or may not occur at some point in the future. As a result, contracts often contain conditions that can be modified or even cancelled if both parties allow certain contingencies in the event that obligations cannot be fulfilled due to fixed circumstances. To put it in context of our example, if Sunshine is shut down because a natural disaster destroyed its crop, or for any other valid economic reason unrelated to its agreement with Squeeze Me, the court will consider the condition of remaining in business as a valid and unfulfilled condition that exempts Sunshine from its obligations to Squeeze Me and insulates Sunshine from any liability. Whether you want to determine that a subsequent condition exists (and applies to a particular scenario) depends on your position in a legal dispute. There are three types of contractual clauses defined by when the conditions must be met. These are: You can also use suspensive conditions in real estate transactions. An example of this could be issues related to the financing of a mortgage or the physical condition of the property for sale. Breaches of contract do not always have to be associated with purchases.

If you have signed a non-competition clause, you could be in breach of your contract if you work for a competing company. You can also commit a violation if you always arrive late without apologies or if you do not submit the correct documents. To put this in context of our example, if the league does not distribute television revenues, the Red Sox Garcia will not have to pay at all, or will they still have to pay Garcia after a postponement, either until the condition is met or until a reasonable period of time elapses? If satisfaction can be measured on the basis of the economic value or calibre of the subject-matter of the contract, it must be proved that performance is defective in this respect and dissatisfaction must be proved to be sufficiently reasonable and justified to justify non-performance of the contract. The test is: What would satisfy a reasonable person? The condition of performance must not be fulfilled if the expression of dissatisfaction is made in bad faith and is not related to the quality or commercial value of the object of the order. Please note, however, that if actual personal satisfaction is required, the party`s dissatisfaction must be in good faith. If his dissatisfaction is not made in good faith, the court will consider that the condition of satisfaction is met. For example: Divisible contracts The full performance of a contract may be a condition of the other party`s obligation to perform. If the contract is legally divisible, the performance of one divisible party may satisfy the condition precedent of the corresponding divisible service of the other party. A contract is divisible if the performance of each part is divided into two or more parts; each party owes the other a corresponding number of services; and the performance of each party by one party is the exchange agreed upon by a corresponding party by the other party. If it is divisible, the contract is treated for certain purposes as if it were a series of contracts, as in employment contracts and leases. .