An agreement between two parties that is deducted from actions or circumstances is referred to as a “condition precedent.” This legal term refers to a contract provision that requires certain events to occur or conditions to be met before the contract can be fully enforced.
The purpose of a condition precedent is to ensure that both parties are protected and that the terms of the contract are fully understood. This type of contract provision is often used in situations where certain events or actions must take place before a contract is considered legally binding.
For example, consider a scenario where a company wants to enter into a contract with a vendor to supply materials for a project. The contract may include a condition precedent stating that the vendor must provide proof of insurance before any work can begin. This condition precedent would protect the company by ensuring that the vendor is properly insured and that any liability issues are covered.
Another example of a condition precedent may be included in a contract between a landlord and tenant. The contract may require that the tenant provide a security deposit before the lease can be executed. This condition precedent helps to protect the landlord by providing some financial assurance that the tenant will fulfill the terms of the lease.
Overall, the use of condition precedents in contracts is a common practice in business and legal transactions. By requiring certain actions or circumstances to be met before the contract can be enforced, both parties can be assured that the terms of the agreement are fully understood and agreed upon.