What are Conditions Precedent?
The Short Answer
Conditions Precedent explained simply
Conditions Precedent are like a checklist in a deal. They are things that must happen before a contract is final or before certain parts of it kick in. Think of it as a safety net. Both the buyer and seller agree on these conditions upfront. If a condition isn't met, the deal might be delayed, renegotiated, or even canceled.
Real-World Example
Buying a House
Imagine you're buying a house. A common Condition Precedent is the buyer getting approved for a mortgage. If the buyer can't get the loan, the deal won't go through. Another might be a satisfactory home inspection. If the inspection reveals major issues the seller won't fix, the buyer can back out.
Why this matters
Conditions Precedent protect both buyers and sellers. For sellers, they ensure the buyer is serious and capable. For buyers, they provide an escape route if key assumptions about the business aren't true. They make sure everyone is on the same page and that important steps are completed before the deal is final.
Always make sure your Conditions Precedent are clear and measurable. Vague conditions can lead to disputes and delays.
Always make sure your Conditions Precedent are clear and measurable. Vague conditions can lead to disputes and delays.
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