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|
Condition |
| Broadly defined as a stipulation in a
contract/agreement that provides for a
consequent result on either the occurrence
or non-occurrence of a specified event. |
| |
| One of the
most complex offer-writing situations
involves the drafting of properly worded
conditions. Generally, these conditions are
inserted at the request of, and for the
protection of, the buyer although this does
not preclude a situation wherein a condition
would be included for the protection of the
seller. |
| |
| Condition Precedent |
| A stipulation, the satisfaction of which
must occur, before the contract can come
into existence and, if satisfied gives rise
to a legally binding contract. Typical
examples include offers that are conditional
on the sale of a buyer’s home or the
arranging of a mortgage. |
| |
| Where a condition precedent exists, even
upon acceptance of the offer, a fully
binding contract is not created until the
condition is met. If the condition is
fulfilled as set out in the
agreement/contract, a binding contract is
formed. If the condition is not fulfilled as
set out in the agreement/contract and if it
is not waived (assuming that a waiver
provision is included in the
agreement/contract), no contract has ever
been formed. |
| |
| Two important effects of a condition
precedent should be emphasized. |
- The condition precedent makes the
creation of a contract/agreement subject
to the prior fulfillment of that
condition.
- The insertion of a condition
precedent will have the effect of
relieving both the buyer and the seller
of their respective obligations under
the agreement/contract if that condition
cannot be fulfilled, unless it is stated
that the condition precedent is for the
benefit of and may be waived by one of
them (often referred to as a waiver
provision ).
|
| When a condition precedent has been
fulfilled, or waived by the buyer, and the
selling party notified, the contract is
capable of completion upon the balance of
the terms and conditions contained in the
offer and a binding contract is formed.
Written confirmation of the fulfillment or
waiver of the condition, must be delivered
to the seller as soon as possible and within
time constraints contained in the condition
precedent. |
| |
| When a condition precedent has been
fulfilled, or waived by the buyer, and the
selling party notified, the contract is
capable of completion upon the balance of
the terms and conditions contained in the
offer and a binding contract is formed.
Written confirmation of the fulfillment or
waiver of the condition, must be delivered
to the seller as soon as possible and within
time constraints contained in the condition
precedent. |
| |
| Most conditions precedent follow
the same pattern: |
- What is to be done (with specific
definable details);
- Who is to do it;
- Who is to pay for it;
- Within what time limit;
- What is to happen in the event that
it is not done; and
- That it may be waived.
|
| Condition Subsequent |
| Condition subsequent is formally defined
as a condition in a contract referring to a
future event upon the happening of which the
agreement/contract becomes no longer binding
on the parties. The term condition
subsequent is a misnomer in that the clause
provides an option allowing the termination
of a contract under certain defined
circumstances. Since the condition
subsequent is an option to terminate, no
waiver is necessary in order to have a firm
and binding agreement. |
| |
| Condition subsequent normally
starts with the words: |
|
The buyer may terminate this Agreement in
the event that.... |
| |
| Many of the same details usual
to the condition precedent are found: |
- What is to be done;
- Who is to do it;
- Who is to pay for it;
- What may happen in the event that it
is not done: i.e., the
agreement/contract can be terminated;
and
- Within what time limit.
|
| See Also |
|
Escape Clause |
