Conditions precedent in commercial contracts


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Commercial expert
Practice notes
In-house

Conditions precedent in commercial contracts


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Commercial expert

Practice notes
In-house
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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:

  1. •

    a contract, or

  2. •

    a party’s obligation(s) under a contract

comes into force. The contract, or the relevant obligation, does not become binding until the condition has been satisfied.

An example of a condition precedent can be found in negotiations which are ‘subject to contract’. See, for example, the comments of the judge in Southeaster Maritime Ltd v Trafigura Maritime Logistics Pte Ltd mv ‘Aquafreedom’ where a ‘subject’ in a charterparty was considered. For more information, see also Practice Note: Forming enforceable contracts—offer — What is an offer ‘subject to contract’?.

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

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Jurisdiction(s):
United Kingdom
Key definition:
Condition definition
What does Condition mean?

A condition is a term of the contract that is so significant that it goes to the heart of the transaction—so it is a major term of the agreement.

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