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What is a Condition Precedent?

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Used in a sentence

The Daily Ledger · Markets

Closing the Series A round acts as a strict condition precedent to the execution of the founder vesting schedule.

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Overview

A condition precedent is something that must happen before a contractual duty switches on. Until the condition occurs, the duty isn't delayed or broken, it simply doesn't exist yet.
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Overview

A condition precedent is the "first this, then that" clause. No first thing? Then no second thing, and nobody's in trouble, because the second thing was never owed. 😎

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Detail

The defining rule: if the condition never happens, nobody breached anything, because the duty it guarded never switched on. A home purchase "subject to financing" is the everyday example, since a buyer whose loan falls through walks away without being in breach, as the duty to buy never turned on. The same structure appears in startup paperwork, where a founder's vesting schedule may only begin once a funding round closes. Contracts signal these conditions with phrases such as "subject to," "provided that," and "conditional upon." The drafting risk is limbo, because a condition with no deadline can leave a deal hanging indefinitely. That is why well-drafted conditions come with a date: satisfied by then, or the parties can walk.
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Detail

The magic phrase is "subject to." "We'll buy the house, subject to financing." "Vesting starts, subject to the round closing." If the condition dies, the deal dissolves politely, with no breach, no lawsuit, everyone just goes home. Compare that to promising outright and failing, which is breach, and breach costs money. That's why lawyers care enormously whether something is a condition or a promise, because the same sentence energy carries wildly different consequences. And always attach a deadline, since a condition with no expiry date is a deal stuck in the waiting room forever. 😎

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Analogy

A city promises a fireworks show, weather permitting. If it storms there's no show, no refunds owed, and nobody sues the city, because the promise only ever existed for clear skies. Those two words are the condition precedent, deciding whether the whole obligation exists.
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Analogy

"If I win the lottery, drinks are on me." The lottery doesn't hit, nobody's owed drinks, and no court in the land will hear your case. The promise was always renting space inside an "if."
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AI explanations may contain errors · Not professional advice

Formal definition — The same term, explained the usual way

A condition precedent is an event or state of affairs that must occur before a party's contractual obligation becomes due. Non-occurrence of the condition excuses performance without constituting breach, as the obligation never matures. Conditions precedent are typically signaled by language such as "subject to" or "conditional upon" and are distinguished from promissory covenants, the non-performance of which gives rise to liability.

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