In a contract, a condition precedent is an event that must occur before the parties are obligated to perform. For example, an insurance contract may require the insurer to pay to rebuild the customer’s home if it is destroyed by fire during the policy period. The fire is a condition precedent. The fire must occur before the insurer is obligated to pay.
Courts prefer to interpret a clause in a contract as a promise rather than a condition precedent to avoid forfeiture. The Second Restatement of Contracts has dropped the term “condition precedent” and simply refers to it as “condition.”
In property law, a condition precedent is an event at which the vesting of a property interest occurs. If the condition does not occur before a specified time, the condition fails, and the property interest does not vest.
For example, if parents write a grant which states they grant the property Blackacre “to our son, if he graduates from college by his 21st birthday”, graduating from college before the son’s 21st birthday is the condition precedent. If the son graduates from college before his 21st birthday, title to Blackacre transfers to him. If the son’s 21st birthday comes and he has not yet graduated from college, the interest never vests, and the parents never lose ownership of Blackacre.
Condition precedents are most frequently seen in combination with contingent remainders. Accordingly, conditions precedent are usually subject to the rule against perpetuities which states that they are invalid unless they must vest, if at all, within 21 years after a relevant life in being.
[Last updated in July of 2022 by the Wex Definitions Team]