Conditional Agreements

• Author: John D. Mccamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 672-688

CHAP TER 17

CONDITIONAL

AGR EEM EN TS

A. INTRODUCTION

The terms of a contract are of two kind s. First, enforceable agreements

contain promises or underta kings i n which the promisor t ypically

undertakes to do cert ain things in the future. Contractual promi ses

may also ta ke the form of a promise or guarantee that a part icular state-

ment is or wi ll continue to be true.1 Second, the ty pical agreement will

contain terms, though they may often be implied rather than express

terms, that stipulate or pr escribe state s of affairs t hat must exist, or not

exist, if one or more of the undertakings in the agreement is to be en-

forceable. Under traditional usage, term s setting out these kinds of ar-

rangements are referred to as “conditions.” A simple building contract,

for example, could contain a promise to build a house accordi ng to cer-

tain specif‌i cations on the par t of the builder and a promise by the hirer

to pay a certain contract pr ice. Either expressly or by implicat ion, the

agreement may contain a further term that stipulates that the comple-

tion of the building by the bui lder is a state of affair s that must exist

before the obligation of the hirer to pay the contract pr ice becomes

enforceable. Where the subject matter of the condition, as in t his illus-

tration, is the performance of one of the promises set out in the agree-

ment, the condition is often referred to as a “promi ssory condition.” A

1 See Chapter 18, sect ion D.

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Conditional Agreements 673

condition will often prescr ibe something other than the performa nce

of a promise as the state of af fairs that must exist before one or more of

the promises in t he agreement becomes enforceable. Thus, for example,

the building contract might prov ide that the promise s to build and to

pay respectively are not enforceable until s uch time as a building per-

mit has been issued by the local municipality. Such a condition may be

referred to as a “non-promissory cond ition” because neither party ha s

promised that the municipality will issue a building per mit. If the mu-

nicipality refuses, for some reason, to issue a building permit, neither

the builder nor the hirer is obliged to per form its contractual promi ses

and neither is in breach of its contr actual obligations.

Condit ions may als o be subdiv ided into “condit ions precedent” and

“conditions subsequent.” A condition precedent describes a state of af-

fairs that must ex ist before one or more of the promises set out in the

agreement becomes enforceable. The enforcement of the obligation, it

is sometimes said, is suspended. If neither part y has promised to f ulf‌i l

the condition — to obtain the building permit in our e xample — we may

describe th is arrangement as a non-promissor y condition precedent. In

such circumsta nces, the condition relating to the building permit is a

condition precedent to the obligations to build and to pay. A condition

subsequent prescribes a state of affair s that will br ing an already en-

forceable and binding obligation to an end. A simple illustration would

be a term in a contract of guarantee that stipulates that the promise of

guarantee wi ll no longer be binding on the promisor once a new board

of directors is appointed to the debtor company. Although the guarantee

is binding on the gua rantor until that event occurs, it term inates on the

occasion of the appointment of the new board. Such an arrangement

may be referred to as a non-promis sory condition subsequent.

In a previous chapter,2 we examined the transformation in the use

of t he t erm “cond iti ons” as i t ref ers to pr omi sso ry c ondi tion s pr ece dent .

In the late-nineteent h centur y, it became common profess ional us age

to refer to the promise, the performance of which is a condition that

must be fu lf‌i lled before one or more of the other parties’ undertaking

becomes enforceable, as itsel f a condition. Under this usage, the prom-

ise of the builder to build the home is categorized as a “condition,” it

being understood that so cl assifying the term had t he consequence that

failure to perform the promi se would render the hirer’s promise to pay

unenforceable. This rather elliptical use of the term “condition” was

adopted in the sale of goods legislation enacted in the late-nineteenth

2 See Chapter 15, sect ion B.