The Condition Precedent Clause Explained (2026)

What a condition precedent is A condition precedent is an event or action that must occur before a party's obligation to perform comes into existence. Until the condition is satisfied (or waived), the obligation it is attached to simply is not yet due. A common example is a sale that depends on the buyer securing financing: no financing, no duty to complete. Conditions precedent come in two broad kinds. Some must be met before the whole contract becomes binding. More often, the contract is already binding, but a particular obligation, usually the obligation to close or to make a payment, only becomes due once the listed conditions are satisfied. In an acquisition these are the "conditions to closing", such as regulatory approvals, third-party consents, and the accuracy of warranties at completion. ## Condition precedent versus condition subsequent The two are mirror images. A condition precedent must happen before a duty arises. A condition subsequent brings an existing duty to an end if a later event occurs. With a condition precedent the obligation is switched on by the event. With a condition subsequent the obligation already exists and is switched off by the event. Drafting should make clear which one you intend, because the burden of proof and the practical consequences differ. ## Why it matters Conditions precedent control the order of play and who carries the risk of an uncertain event. They let parties sign now and commit to perform only if defined gates are cleared, which is essential where approvals, consents or funding are outside either side's full control. They also protect a party from having to perform into a situation that has changed, for example if a warranty that was true at signing is no longer true at closing. Getting them wrong is costly. If a condition is never satisfied and there is no long-stop date or walk-away right, the parties can be left in limbo. If a condition is drafted as a promise rather than a gate, a failure can become a breach rather than simply a deal that does not proceed. ## A sample clause > Completion of the sale and purchase of the Shares is conditional on each of the following Conditions being satisfied (or waived in accordance with Clause [X]) on or before the Long Stop Date:

(a) the approval of [the relevant competition authority] having been obtained; (b) the Warranties remaining true and accurate in all material respects as at Completion; and (c) no Material Adverse Change having occurred. If any Condition has not been satisfied or waived by the Long Stop Date, either party may terminate this Agreement by written notice, and neither party shall have any claim against the other save in respect of prior breach. ## How to negotiate it Say who must satisfy each condition and use best efforts wording. For conditions within a party's influence, such as obtaining a consent, add an obligation to use reasonable or best endeavours, so one side cannot simply sit on its hands to escape the deal. Set a long-stop date. Always include a date by which the conditions must be met, and a clear right to walk away if they are not. This prevents the contract hanging open indefinitely. Allow waiver, and say who can waive. A condition that exists to protect one party should usually be waivable by that party alone. Distinguish a gate from a promise. Decide whether failure of a condition simply means the obligation does not arise (a true condition) or whether it is also a breach giving rise to damages. Keep the drafting consistent. List the conditions precisely. Vague conditions invite argument about whether they have been met. Tie each to an objective, verifiable event. ## Common mistakes No long-stop date, so the deal cannot be cleanly abandoned. Mixing up a condition and a covenant, so a missed gate becomes a damages claim. Forgetting to say who bears the effort of satisfying a condition. Failing to address what happens to deposits, costs and confidentiality if the conditions fail. ## One workspace to draft, review and track your clauses Most teams do not lose on the wording of a single clause. They lose because the clause lives in a Word file, the risk sits in someone's head, and the key date hides in an inbox. The fix is to keep drafting, review, tracking and governance in one place instead of five disconnected tools. The single-workspace idea is simple. You draft from your own catalogue and house style, the system reads any document and flags positions as favourable, neutral or unfavourable to your company, every edit is tracked with a timeline, and obligations and dates become alerts you can assign. Because the contract is held as a structured clause tree rather than flat text, you can change a clause in plain English and see exactly what moved. Adira is one such workspace, built on Anthropic's Claude and tuned to how your company actually contracts. India is deepest today, with other jurisdictions and a company command centre on the roadmap.