# Condition precedent

Source: https://contracko.com/glossary/condition-precedent

# Condition precedent

A future uncertain event that must occur before a contractual obligation takes effect.

## 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.

### How Contracko helps

Contracko records conditions precedent as tracked milestones with deadline reminders, so the responsible party is alerted as the longstop approaches. The contract summary surfaces what each condition requires, keeping deal management on track without relying on memory.

## Legal references

- [BW 6:21 Dutch Civil Code: conditional obligations Dutch law](https://wetten.overheid.nl/BWBR0005289)
- [BW 6:22 Dutch Civil Code: condition precedent Dutch law](https://wetten.overheid.nl/BWBR0005289)

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.

## Relevant for

[Financial Services](https://contracko.com/industries/financial-services)[Commercial Real Estate](https://contracko.com/industries/commercial-real-estate)[Consulting](https://contracko.com/industries/consulting)

## Related clauses

- [Conditions Subsequent](https://contracko.com/clause-library/conditions-subsequent)
- [Letter of Intent (Heads of Terms)](https://contracko.com/clause-library/letter-of-intent)

## Related terms

- [Conditions subsequent](https://contracko.com/glossary/conditions-subsequent)
- [Escape clause](https://contracko.com/glossary/escape-clause)
- [Effective date](https://contracko.com/glossary/effective-date)
- [Right of suspension](https://contracko.com/glossary/right-of-suspension)

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## Frequently asked questions

Common questions about this term.

- **Q:** What happens if a condition precedent is not fulfilled?
  **A:** The obligation suspended by the condition never takes effect. If the contract as a whole was conditional, it does not bind either party. Any preparatory costs are typically each party's own risk unless the contract provides otherwise.

- **Q:** Does a condition precedent have to be in writing?
  **A:** Not as a rule, but in practice conditions precedent are always documented in the contract because clarity about their nature and satisfaction procedure is essential, especially in M&A or real estate transactions.

- **Q:** Can a party waive a condition precedent?
  **A:** Generally yes, if the condition was inserted for the benefit of that party alone. Waiving a condition precedent makes the obligation unconditional and the contract binding, so it should only be done with care.

- **Q:** Is regulatory approval a common condition precedent?
  **A:** Yes, especially in M&A transactions. Competition clearance, sector-specific licences, and foreign investment approvals are all common. The contract usually places the obligation to seek approval on one or both parties.

- **Q:** What is the difference between a condition precedent and a warranty?
  **A:** A condition precedent must occur before the obligation arises; if it fails, the obligation is simply never born. A warranty is a statement that something is or will be true; if it is untrue, the innocent party has a remedy (damages or sometimes rescission) but the contract remains in force.

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