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. Trust

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

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

    A legally binding fiduciary relationship in which the trustee ...
  6. Will

    A legally enforceable declaration of how a person wishes his ...
Related Articles
  1. Top 7 Estate Planning Mistakes
    Retirement

    Top 7 Estate Planning Mistakes

  2. Tax-Efficient Wealth Transfer
    Taxes

    Tax-Efficient Wealth Transfer

  3. Why You Should Draft A Will
    Retirement

    Why You Should Draft A Will

  4. Refusing An Inheritance
    Retirement

    Refusing An Inheritance

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

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