What is meant by a condition precedent in a contract?

A condition precedent in a contract refers to specific events or circumstances that must occur before the contract becomes legally binding or effective. This means that the fulfillment of these conditions is essential for the parties to be obligated in accordance with the agreement. Until the condition precedents are satisfied, the parties are not committed to the contract terms.

For instance, in a real estate transaction, a common condition precedent may be obtaining financing or an inspection that meets agreed-upon standards. If these events do not occur, the contract may not go into effect, and the parties may have the option to walk away without any legal repercussions. This concept is crucial in contract law because it protects the interests of the parties involved by ensuring that certain prerequisites are achieved before the obligations of the contract kick in.