Are certain steps to be taken to fulfil the condition and should evidence of these steps be provided? Setting out the steps required to fulfil the condition may, in some cases, be helpful and assist the parties to understand exactly what is required of them.
However, you should not assume that setting out the explicit steps required to fulfil a condition precedent will always be to your advantage. In some cases, stating the desired outcome may be enough with the parties being able to reach that outcome any way they choose.
Evidence of the steps taken by a party to satisfy the condition could also be a requirement in the contract, but consideration should be given to whether this is necessary or will just create additional work for your business. Does the condition precedent have to be completely satisfied or can the parties use best or reasonable endeavours?
Read our article on Interpreting Endeavours Clauses for further information. What is the deadline to fulfil the condition? A date the condition must be fulfilled should be agreed. Failure to include a date will result in the condition having to be satisfied within a reasonable time.
Who decides whether the condition has been satisfied and how? Can satisfaction of the condition be determined by one of the contractual parties or is documentary or other evidence required? This depends on the actual condition as, for example, receipt of third party written consent may be sufficient to satisfy the condition precedent that a third party has given their consent without needing the other contracting party to agree that the condition precedent has been met.
What happens if the condition precedent is not satisfied? Failure to satisfy the condition precedent can lead to the contract not becoming effective, but this needs careful consideration. A commercial solicitor can advise on whether the entire contract will fall away or if certain conditions, such as confidentiality, should survive despite the condition precedent not being met.
Alternatively, the contract could be drafted for the contract to terminate immediately on failure to satisfy the condition precedent or to enable one party to choose to terminate the contract. You will also need to consider if it is in your business interests for one party to be able to waive the condition precedent requirements, resulting in the contract becoming binding, despite the condition not having been satisfied or enabling them to agree an extension to the condition deadline.
Consideration should also be given as to whether one party must compensate the other for any costs incurred as a result of non-fulfilment. Back to table of contents. What next? Yes, please you can unsubscribe at any time. Send inquiry. Martin Chrometzka. You may be trying to access this site from a secured browser on the server.
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A divorce or relocation could also cause problems. So, the party asks for a CS that relieves them of an obligation. This happens when the condition occurs. It frees one party from the contract. It's an escape clause for bad events. The party mentioned in the CS no longer has any requirements in the contract. Note that the defendant has the burden of proof in CS matters. A court of law will expect the party to show that he met the terms stated in the contract. The same is true of CP rulings.
Finally, a key aspect of the CS is who chooses the outcome. For example, if a CS involves a person's taste or judgment, that person is the only one who can decide if a condition is met. The subject of the contract has all the power. Because of this, leaving a condition up to personal taste or judgment is a bad idea.
An out is a simpler term for a condition subsequent. The CS clause in a contract offers one or more reasons for a party to exit the agreement. Each of them is an out. Having an out gives a party great contract protection. That's why outs are subject to intense contract negotiation. A condition precedent can either be implied or expressly stated in the terms of the contract.
These stipulations also have two important characteristics. First, one party must fulfill their contractual obligations before demanding the same of the other party. Second, a specific event must take place before a party is granted a performance right or will have the ability to sue the other party for damages. A good way to understand a condition precedent is an event that triggers something else to occur. For example, if you uphold your part of the contract, the other party will then be required to fulfill their responsibilities.
When included in a contract, a condition precedent is a requirement that must be met before the contracted parties will be required to complete their obligations. As with most legal terms, it can be difficult to understand condition precedent. Basically, a condition precedent is a specific event that is listed in a contract. Before this event takes place, the contract is not in effect, and the parties are not obligated in any way.
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