Did you know that not every contract comes into force or effect on signature?
Some contracts are subject to conditions which can either suspend their coming into force until a later date or the occurrence of the condition can extinguish or terminate the contract on the occurrence of a future event.
Here are some conditions you need to be aware of:
- Condition Precedent (Suspensive Condition)
A condition precedent is a clause in a contract that provides that the performance of the contract or certain obligation will only come into effect on the completion or waiver of a future uncertain event within an agreed time period. Therefore, assuming the essential elements of a contract have been satisfied, a binding contract may be formed but the performance of the contract or certain obligations in the contract will only become due on the fulfilment or waiver of the condition precedent.
Examples of conditions precedent
– Obtaining regulatory approvals- e.g., Competition and Consumer Authority, Botswana Stock Exchange
– Obtaining change of control approvals- required in terms of contractual terms or licensing requirements
– Securing of bank funding
– Obtaining Botswana Unified Revenue Service clearance
2. Condition Subsequent (Resolutive Condition)
A condition subsequent is a clause in a contract which has come into force, which provides that on the occurrence or non-occurrence of a future uncertain event, the contract or a specific clause in a contract will terminate. From the onset, the parties agree that the contract is effective and in force, but should an agreed event happen or not happen at an agreed time, the contract or certain clauses will terminate.
Examples of conditions subsequent
– registration of a lease in notarial form
– regularisation of non-material regulatory submissions
– regularisation of a company’s minute book
It is critical to understand the types of contracts, their conditions and their effects before making any decision or taking any action.
Should you require any assistance please feel free to contact us at firstname.lastname@example.org or +267 3975779.