Condition precedent

Definition

A condition precedent (opschortende voorwaarde) suspends the working of an obligation until a defined uncertain future event occurs; until then the obligation exists but is not yet enforceable. Once the condition is fulfilled the obligation takes full effect; if it definitively fails, the obligation never arises. Condition precedents are commonly used to make a deal contingent on financing, regulatory approval, or board consent.

Example

The share purchase only becomes binding once the competition authority clears the deal, a condition precedent to completion.

Why this is a business risk

If a condition precedent is not clearly defined, disputes arise about whether it has been fulfilled and who bears the risk if it cannot be satisfied. Parties sometimes invest significantly in pre-completion steps (due diligence, integration planning) before conditions clear, and an unexpected failure can leave those costs unrecoverable unless the contract addresses them. Longstop dates that expire before the condition is met can unexpectedly kill a deal that all parties wanted to complete.

How to manage it

• Define each condition precisely and identify which party is responsible for satisfying it.
• Set a realistic longstop date with enough buffer for regulatory or approval delays.
• Agree on a best-efforts or reasonable-efforts standard for satisfaction so neither party can passively let a condition fail.
• Track the status of each condition as a milestone in your contract system and set a reminder before the longstop date.
• Agree in advance what happens to preparatory costs and confidential information if a condition fails.

Legal references

• BW 6:21 Dutch Civil Code: conditional obligations Dutch law
• BW 6:22 Dutch Civil Code: condition precedent Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.