Condition Precedent

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.



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