Condition
A contractual term that must be satisfied before a party's obligation to perform arises (condition precedent) or that discharges an obligation upon occurrence (condition subsequent).
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Condition?
A condition is a contractual provision that ties a party's performance obligation to the occurrence (or non-occurrence) of a specified event. Unlike a promise, a condition does not create a duty - it determines whether a duty exists or continues.
A condition precedent must be satisfied before a party's duty to perform arises. For example, a buyer's duty to close on a home purchase is conditioned on obtaining financing. A condition subsequent extinguishes an existing duty if the specified event occurs - for example, a contractor's right to payment may terminate if the owner cancels the project for cause.
The distinction between a condition and a promise matters enormously in litigation. If a term is a promise, its breach entitles the other party to damages. If it is a condition, its failure simply means the conditioned obligation never arose - there may be no liability at all.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Express vs. Implied Conditions
Express conditions are explicitly stated in the contract. Implied conditions arise from the nature of the agreement or from law - for example, the implied condition of good faith performance.Condition Precedent
An event that must occur before a duty to perform arises. Common examples: financing approval, regulatory clearance, board approval, or satisfactory due diligence.Condition Subsequent
An event that, if it occurs after performance has begun, extinguishes the obligation. Less common but found in insurance policies (e.g., "coverage terminates if the insured engages in the excluded activity").Waiver of Condition
A party may waive a condition that exists for their own protection. For example, a buyer can waive the financing condition and proceed with cash. Waiver must typically be express or clearly implied by conduct.Substantial Compliance
Courts sometimes apply the doctrine of substantial compliance to conditions - if a party nearly satisfies a condition, a court may treat it as met to avoid forfeiture, especially where the condition is not a material one.Real-World Example
Your company signs a software license agreement "conditioned upon your board's approval within 30 days." The board never votes. The vendor demands payment.
Because board approval is a condition precedent, your payment obligation never arose. The vendor cannot demand payment - the condition was never satisfied. Had the term been a promise ("you will obtain board approval"), the analysis would differ: you would be in breach for failing to pursue approval, but the vendor might still be owed damages.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
Condition Precedent ClauseWatch Out For
Confusing conditions with promises
Poorly drafted contracts blur the line between conditions and promises. If a term is ambiguous, courts may construe it as a promise (creating liability for breach) rather than a condition (merely excusing performance). Use clear language: "conditioned upon" vs. "shall".Failing to specify who bears the risk if a condition fails
What happens if a condition fails through no party's fault - for example, financing falls through because of a market crash? The contract should address whether termination is the only remedy or whether either party owes compensation.Deemed waiver through conduct
If you proceed with performance after a condition has failed, a court may find you waived the condition. Always document in writing if you choose to waive a contractual condition.Don't let condition deadlines catch you off guard
Key dates tied to conditions - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Label conditions clearly in your contracts
Use the words "condition precedent" or "conditioned upon" explicitly. Avoid vague language that could be read as either a condition or a promise.Set deadlines and consequences for unsatisfied conditions
Specify what happens if a condition is not met by a deadline - automatic termination, extension option, or negotiated resolution. Leaving this open invites disputes.Frequently Asked Questions
What is the difference between a condition and a warranty?
A condition is a term so fundamental that its breach entitles the innocent party to treat the contract as discharged (in common law jurisdictions). A warranty is a less important term whose breach gives rise only to damages. In US contract law, this distinction is often framed as condition vs. promise rather than condition vs. warranty.
Can a condition be oral?
Generally yes, unless the contract falls under the Statute of Frauds. However, the parol evidence rule may prevent oral conditions from being introduced if the written contract is fully integrated. Always document conditions in writing.