Condition precedent Definition

GLOSSARY

Published by a ��˾��ҹ�� Commercial expert

What does Condition precedent mean?

A condition which delays the vesting of a right until the beginning of an event.

Commercial

A condition precedent in a commercial contract details an event which must take place before a contract, or a party's obligation(s) under a contract come into force. The contract, or the relevant obligation, does not become binding until the condition has been satisfied. In financing transactions, conditions precedent are the conditions that need to be fulfilled for funding to occur.

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ISDA documentation in a finance transaction—checklist

ISDA documentation in a finance transaction—checklist This checklist sets out the key ISDA documentary requirements which need to be considered during the course of a financing transaction. Term sheet stage • if acting for a borrower and specialist hedging advisors are instructed, get their input on the term sheet • if acting for a borrower, ensure that the overall pricing of the transaction is understood (across both the loan and the hedging). A borrower may choose a particular lender based on a low margin offered on the loan, but then find that the credit spread on the swap offered by the same lender means that the overall economics of the transaction are less attractive than those offered by a different lender • is the loan and hedging on an IBOR basis (eg EURIBOR) or on a risk free rate (eg SONIA)? Will the loan transition from an IBOR to a RFR during its term and, if so, how will the hedging be dealt with? • does the lender require a...

Pre-completion in loan transactions—checklist

Pre-completion in loan transactions—checklist Stop Press: We are aware of issues with security filings at Companies House not showing up on the charges register in some cases. We suggest cross checking the charges register against the filings history as part of any due diligence checks. The first significant step towards completion in a loan transaction is 'signing'. Signing is the point at which the parties execute the agreed versions of the documents and the deal becomes binding (albeit, in most cases, subject to certain conditions precedent being satisfied). For more information, see Practice Notes: How to arrange execution of the finance documents in a loan transaction and Signing and completion phase in loan transactions. After signing, the parties will proceed to satisfying the conditions precedent to funding. For more information, see Practice Notes: Conditions precedent and Conditions precedent phase in loan transactions. Once the conditions precedent have been satisfied, the lender's lawyers will perform the final pre-completion searches before funding. For more information, see Practice Note: How to conduct pre-completion...

Conditions precedent in commercial contracts

This Practice Note considers the meaning and use of conditions precedent in commercial arrangements. It also considers typical conditions precedent and drafting issues.What are conditions precedent?A condition precedent in a commercial contract details an event which must take place before:•a contract, or•a party’s obligation(s) under a contractcomes into force. The contract, or the relevant obligation, does not become binding until the condition has been satisfied.In Nautica Marine Ltd v Trafigura Trading LLC, the judge distinguished between a ‘pre-condition’ to contract (which has the effect of preventing a contract coming into existence altogether) and a ‘performance condition’ (which does not prevent a binding contract coming into existence, but which if not satisfied means that performance does not have to be rendered). While each case will depend on its own individual facts and commercial context, an important determining factor is whether satisfaction of the condition depends on the decision of a contracting party or a third party. A condition is more likely to be a pre-condition than a performance condition where it...

Conditions precedent

In financing transactions, conditions precedent are the conditions that need to be fulfilled for funding to occur.This Practice Note explains:•the nature of conditions precedent•the different types of conditions precedent (ie documentary or factual)•what needs to be taken into account when determining whether the conditions precedent have been satisfied, and•what happens if the conditions precedent are not satisfiedThis Practice Note looks at the usual conditions precedent in a finance transaction at the time of:•first drawdown, and•future drawdowns throughout the life of the facilityWhere appropriate, this Practice Note highlights relevant provisions in Precedent: Facility agreement (term loan): single company borrower—bilateral—with or without security or a guarantee and the Loan Market Association (LMA) investment grade multicurrency term facility agreement (the LMA facility agreement) (available to LMA members on the LMA website).The LMA has a series of helpful user guides in the Documents & Guidelines section of its website which provide guidance on its documentation. Additionally, the Association of Corporate Treasurers (ACT) ACT Borrower’s Guide to the LMA’s Investment Grade Agreements contains useful guidance...

Discover our 323 Practice Notes on Condition precedent

Ireland—Simple mediation clause

Ireland—Simple mediation clause Nature of the clause This Precedent is a short-form clause for use in a business-to-business (B2B) commercial contract providing for mandatory mediation in the event of a dispute arising out of the agreement. This Precedent clause provides that the parties will seek to settle the dispute. Unlike litigation and arbitration clauses, the purpose of this clause is for the parties to seek to resolve the matter with the assistance of a mediator, but without the need for formal contentious proceedings. What is mediation and why have a mediation clause? Mediation is a form of alternative dispute resolution (ADR) in which a third-party mediator follows a structured process to facilitate an agreed settlement between parties to a dispute. Mediation is a non-binding dispute resolution process, ie any agreement reached in mediation will only be binding on the parties if they enter into a settlement agreement. Mediation allows the parties a high degree of control compared with litigation and provides a collaborative process for dispute resolution. Further advantages of...

Music publishing agreement—pro-publisher

Music publishing agreement—pro-publisher This Agreement is made on [date] Parties 1 [Insert name of Publisher] a company incorporated in [England] with registered number [company number], whose registered office is at [address] (Publisher); and 2 [Insert name of Writer] of [insert address] (Writer). Background (A) The Writer is a composer of musical works and/or an author of lyrics of literary works; (B) The Publisher is engaged in the business of music publishing throughout the Territory and has, inter alia, facilities for the administration and exploitation of musical works; and (C) The Publisher wishes to acquire and the Writer wishes to grant to the Publisher the exclusive right to the Writer’s share of the Compositions, subject to the terms of this Agreement. It is agreed as follows: 1 Definitions and Interpretation 1.1 In this Agreement: Accounting Period • means each six monthly period ending on 30 June and 31 December; Advance • means all monies paid to the Writer by the Publisher other than royalties. Such...

Dive into our 60 Precedents related to Condition precedent

If administrators of a policyholder did not notify insurers of a claim against the policyholder within the 28-day time limit stated in the policy, can insurers reject cover?

If administrators of a policyholder did not notify insurers of a claim against the policyholder within the 28-day time limit stated in the policy, can insurers reject cover? It is assumed that the claim would otherwise trigger cover under the insurance policy and that it is a liability insurance policy. Under a liability insurance policy, a notification clause is framed as a condition precedent to indemnity under the policy, to allow insurers to investigate the claim at an early stage. In the absence of a clause allowing for extended reporting of claims notifications, an insurer can rely on a breach of a condition precedent to deny liability, regardless of whether insurers have suffered any prejudice. See Practice Note: Liability insurance—notification of claims and circumstances and defence of claims. It should be noted that the purpose of section 11 of the Insurance Act 2015 relates to terms that define the risk as a whole, and it is to prevent insurers from relying on a breach unconnected to the...

Is a contract enforceable if the nominal consideration of £1 is never paid?

Is a contract enforceable if the nominal consideration of £1 is never paid? The placement of clauses providing for nominal consideration is used in some contracts to fulfil the requirements of consideration. Nominal consideration is the payment of a small amount that is still sufficient for legal purposes but 'nominal' in that it would not be adequate in any commercial sense. A sum of one pound sterling is commonly indicated as the nominal consideration, although higher amounts are sometimes seen. We refer you to Precedent: Nominal consideration clause and the related Drafting Notes which state that: ‘The reference to the receipt of the nominal consideration is important, particularly to avoid any risk of

See the 61 Q&As about Condition precedent

Hong Kong—Dismissal of award challenge based on failure to deal with issue (X and YCo v ZCo)

Arbitration analysis: The plaintiffs (X and YCo) applied to set aside an arbitral award issued in the defendant’s (ZCo’s) favour on the basis that the arbitral tribunal had not dealt with ‘key issues’ put before it. In dismissing the plaintiffs’ application to set aside the award, the Hong Kong Court of First Instance emphasised that the onus is on the parties to identify the salient issues in dispute before the tribunal. Written by Amanda Lees, partner at King & Wood Mallesons.

JCT 2024 Standard Building Contracts and Sub-Contracts released

Construction analysis: On 21 August 2024, the Joint Contracts Tribunal (JCT) published the 2024 editions of its Standard Building Contract (SBC) suite. The suite includes 2024 editions of the Standard Building Contract With Quantities, Standard Building Contract Without Quantities, Standard Building Contract With Approximate Quantities, Standard Building Sub-Contract Agreement and Conditions, and Standard Building Sub-Contract with sub-contractor’s design Agreement and Conditions, together with their associated guides and Contract Model Administration Forms. In this analysis, we consider how these contracts differ from their 2016 equivalents, and the extent to which the changes are consistent with those made to the other JCT 2024 forms released this year.

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