Sometimes performance of a contractual obligation may be contingent upon the occurrence of a condition.
Including a condition in a contract may also help regulate when performance is due.
There are distinct types of conditions.
The first type are concurrent conditions.
Here, both contractual promises are to be performed at the same time. That’s true because each party’s performance is a condition of the other party’s obligation to perform.
Ann promises to sell her computer to Bob for $2,000. Bob promises to pay Ann $2,000 for her computer. The law implies a condition concurrent that the payment of and the delivery of the computer will be simultaneous, or will occur at the same time.
If Bob does not tender payment then Ann does not have to complete delivery of the computer. If Ann does not tender delivery of the computer, then Bob does not have to pay.
The second type are conditions precedent.
A condition precedent entails that a specified event must occur first, before the party’s duty to perform arises. While there is already a contract in place between the parties, there is no obligation to perform until the condition occurs. If the condition never occurs, the duty to perform also never arises.
An example of a condition precedent is the following:
Li agrees to buy David’s business for $450,000 provided that she can find suitable financing within 30 days. If Li finds financing within 30 days then the condition precedent has been satisfied and she has the duty to perform her part of the contract by buying the business. If Li does not find suitable financing within 30 days then she is discharged from having to perform.
The third type are conditions subsequent.
A condition subsequent is an event that extinguishes a duty to perform that has already arisen and is currently being carried out.
There is a contract and duty to perform, but the duty to perform stops when the condition occurs.
An example of a condition subsequent would be this:
Elena agrees to work for IBM for two years unless she is admitted to law school.
If Elena is admitted to Harvard Law during the third week as an IBM employee, the condition subsequent has been met and Elena’s duty to perform – to keep working for IBM – has been extinguished.