Condition Precedent

AAA

DEFINITION of 'Condition Precedent'

A legal term describing a condition or event that must come to pass before a specific contract is considered in effect or any obligations are expected of either party.

There may also be condition precedents in the ongoing life of a contract, which simply state that if condition X occurs, event Y will then occur. Condition X is the condition precedent.

INVESTOPEDIA EXPLAINS 'Condition Precedent'

In real estate, for example, a mortgage contract will have a condition precedent that an inspection to assess the condition and value of the property must occur and be agreed to by both the buyer and the lender before the mortgage contract takes effect.


Condition precedents are also quite common in wills and trusts, where the transfer of money or property only occurs after certain stipulations are met, such as an heir being married or reaching a certain age.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Breach Of Contract

    Violation of any of the agreed-upon terms and conditions of a ...
  3. Will

    A legally enforceable declaration of how a person wishes his ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Revocable Trust

    A trust whereby provisions can be altered or canceled dependent ...
  6. Incentive Trust

    A legally binding fiduciary relationship in which the trustee ...
Related Articles
  1. Retirement

    Top 7 Estate Planning Mistakes

  2. Taxes

    Tax-Efficient Wealth Transfer

  3. Retirement

    Why You Should Draft A Will

  4. Retirement

    Refusing An Inheritance

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center