This Practice Note considers the meaning and Use of Conditions precedent in commercial arrangements. It also considers typical conditions precedent and drafting issues.
A Condition precedent in a commercial Contract details an event which must take place before:
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