Conditional Agreements
| Author | John D. McCamus |
| Pages | 767-784 |
767
CH A PTE R 17
CONDITIONAL
AGR EEM EN TS
A. INTRODUCT ION
The terms of a contract are of two kinds. Fir st, enforceable agreements
contain promises or undert akings in which the promisor typically
undertakes to do cert ain things in the future. Contractu al promises may
also take the form of a promise or guarantee that a particula r statement
is or will continue to be tr ue.1 Second, the typical agreement will con-
tain term s, though they may often be implied rather t han express terms,
that stipulate or prescribe states of affairs that must exist, or not exist,
if one or more of the undertakings in the agreement is to be enforceable.
Under traditional usage, term s setting out these kinds of arrange-
ments are referred to as “conditions.” A simple building contract, for
example, could contain a promise to build a house according to cer tain
specifications on the par t of the builder and a promise by the hirer to
pay a certain contract price. Either expressly or by implication, the
agreement may contain a further term that stipulates that the comple-
tion of the building by the builder is a st ate of affairs that must exist
before the obligation of the hirer to pay the contract price becomes
enforceable. Where the subject matter of the condition, as in this i llus-
tration, is the perform ance of one of the promises set out in the agree-
ment, the condition is often referred to as a “promissory condition.” A
condition will often prescribe something other than the performa nce
1 See Chapter 18, Sect ion D.
THE LAW OF CONTR ACTS768
of a promise as the state of affairs that must exist before one or more of
the promises in the ag reement becomes enforceable. Thus, for example,
the building contract might provide th at the promises to build and
to pay respectively are not enforceable until such ti me as a building
permit has been i ssued by the local municipality. Such a condition
may be referred to as a “non-promissor y condition” because neither
party has promi sed that the municipality will issue a building permit. If
the municipality refus es, for some reason, to issue a building permit,
neither the builder nor the hirer is obliged to perform it s contractual
promises and neither is in breach of its contractual obligations.
Conditions may also be subd ivided into “conditions precedent”
and “conditions subsequent.” A condition precedent describes a state of
affairs th at must exist 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 party has promised to fulfil
the condition — to obtain the building permit in our ex ample — we may
describe this arrangement as a non-promissory condition precedent. In
such circumstances, the condition relating to the building permit is a
condition precedent to the obligations to build and to pay. A condition
subsequent prescribe s a state of affairs that will br ing an already enforce-
able and binding obligation to an end. A simple illustration would be a
term in a contract of guara ntee that stipulates that the promise of gua r-
antee will 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 guara ntor until that event occurs, it terminates on the
occasion of the appointment of the new board. Such an arrangement
may be referred to as a non-promissor y condition subsequent.
In a previous chapter,2 we examined the tr ansformation in the use
of the term “conditions” as it refers to promissory conditions precedent.
In the late-nineteenth century, it became common professional usage
to refer to the promise, the performance of which is a condition that
must be fulfilled before one or more of the other parties’ undertaking
becomes enforceable, as itself 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 h ad the consequence that
failure to perform the promise would render the hirer’s promise to pay
unenforceable. This rather elliptical us e of the term “condition” was
adopted in the sale of goods legislation enacted i n the late-nineteenth
century in England3 and elsewhere in the British Commonwealth,4
2 See Chapter 15, Sect ion B.
3 Sale of Goods Act, 1893 (UK), 56 & 57 Vict, c 71.
4 See, for example, Sale of Good s Act, RSO 1990, c S.1.
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