Condition Precedent vs. Condition Subsequent vs. True Condition Precedent (Ontario)
Contractual duties arise upon acceptance and formation of a contract. There is then an obligation of “good faith contractual performance”.
The True Condition Precedent anticipates Third Party involvement and decisions which cannot be guaranteed by the parties, like a mortgage assumption approval by a Bank, or a severance by a Municipality. Here, only an Notice of Fulfillment can be used.
All conditions can be written as either Conditions Precedent or Conditions Subsequent.
A Condition Precedent requires a positive act before proceeding with a deal. Remember this is not “firming up”, the Agreement is already “firm”; it simply contains some conditions.
A Condition Subsequent requires no paperwork to proceed. The only paperwork would be to stop the deal. This means that the deal could proceed by accident or oversight in some cases. That can be risky.
Conditions Precedent are preferred for the sole practitioner real estate registrant. A positive act is required in order to proceed.
Conditions Subsequent are often used by lawyers, since they have many back-up systems in place.
Conditions Subsequent work well for the Lawyers’ Approval” clauses.
Waivers or NOF’s are both used for Conditions Precedent. There are no documents needed to proceed with a Condition Subsequent.
Brian Madigan LL.B., Broker