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Conditions of the Contract
Depending on the context in which the term is used, a condition of the contract can have a couple of different meanings. In its simplest form, a condition of the contract is a requirement or term of the contract with which one or both of the parties must comply.
In other contexts, a condition of the contract refers to an uncertain future event which, if it occurs, affects the obligations in the contract. When such a condition occurs, the entire contract is sometimes voided. In other instances, an obligation of one or both of the parties may be enlarged, reduced, or created. Conditions of the contract can be express or implied.
- Express condition – express conditions, which are relatively common, are explicitly stated in the contract. An example familiar to many is a financing contingency in a real estate contract. The condition states that the completion of the sales agreement will occur only if the buyer is able to obtain financing. Therefore, if the buyer does not obtain financing, the sale will not close.
- Implied condition – an implied condition is not specifically stated in the contract, but the law may presume that certain conditions must exist. For example, if a horse breeder agrees to sell and deliver a specific mare to a buyer, but the mare dies before the delivery date due to no fault of the seller, the seller will generally not be in breach. The law reasonably implies the condition that the animal must be living.
Frequently Asked Questions
What’s the difference between a condition and a warranty?
A condition goes to the heart of the agreement, so failing it can let the other party treat the contract as ended. A warranty is a lesser promise, and breaking it usually gives the injured party damages but not the right to walk away. Courts look at substance, not just the label a drafter used.
What is a condition precedent in a contract?
It’s an event that has to happen before a party’s duty to perform kicks in. A financing contingency in a real estate deal is the classic example: if the buyer can’t get a loan, the obligation to close never arises. Drafters should state the event, the deadline, and what happens if it doesn’t occur.
Can a condition be implied if it isn’t written?
Yes. Courts sometimes read in conditions the parties clearly assumed, even without express language. If a seller agrees to deliver one specific horse and the animal dies through no fault of the seller, the law generally implies that the horse’s continued existence was a condition, so there’s no breach. Express language is still far safer.
