B. Conditions Precedent to the Existence of an Agreement

AuthorJohn D. McCamus
ProfessionProfessor of Law. Osgoode Hall Law School, York University
Pages675-679

Page 675

It is not uncommon to find judicial statements to the effect that the non-fulfilment of a particular condition precedent prevents the formation or existence of an agreement or the existence of a particular obligation within the agreement. Such statements are to be viewed with caution. In Aberfoyle Plantations Ltd. v. Cheng,8the parties had agreed to the purchase and sale of a rubber estate. A minor portion of the es-

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tate had been leased by the vendor under leases that required renewal. Accordingly, the sale agreement stipulated that the purchase was "conditional on the vendor obtaining ... a renewal of the ... leases" by a specified date and further stipulated that "if for any cause whatsoever, the vendor is unable to fulfil this condition, this agreement shall become null and void and the vendor shall refund to the purchaser the ... deposits already made." In the event, the leases had not been renewed either by the agreed date or by a revised deadline to which the parties had agreed. Nonetheless, the vendor sought to enforce the agreement on the ground that consent would likely be forthcoming in due course. The purchaser, however, purported to terminate the contract and claimed for return of the deposit. Unsurprisingly, the court held that the vendor’s failure to fulfil the condition precluded enforcement and the purchaser was awarded recovery of its deposit. In the course of explaining the result, however, Lord Jenkins described the effect of the condition relating to the renewal of the leases in the following terms: "It was thus made plain beyond argument that the condition was a condition precedent on the fulfilment of which the formation of a binding contract of sale was made to depend."9Lord Jenkins thus appears to suggest that there was no binding contract in existence prior to fulfilment of the condition and the vendor and the purchaser were therefore at liberty to withdraw from the arrangement without penalty prior to its fulfilment. It seems unlikely that Lord Jenkins meant to suggest that the relationship prior to fulfilment of the condition did not constitute a binding contractual relationship. No such finding was necessary in order to explain the result that rests, simply, on the vendor’s failure to meet the condition precedent to the purchaser’s obligation to close the transaction. Moreover, the enforceability of the arrangement prior to fulfilment is a matter to be tested, surely, by the ordinary rules of formation10and enforceability.11If Lord Jenkins did intend to suggest that no binding agreement had been entered into, this proposition appears to be incorrect. Thus, in a later English case,12in the context of a contract for the sale of a lease that was "subject to" the vendor obtaining the requisite consent from the landlord, the contract was held to be binding. In this case, the cor-

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rectness of Lord Jenkin’s observations in the Aberfoyle decision was doubted.13Where, however, the condition precedent essentially reserves a unilateral discretion to withdraw from the apparent agreement, there would appear to be no agreement in existence until such time as the condition is fulfilled. Thus, in a British Columbia case,14a contract for the purchase and sale of a hotel was "subject to [the purchaser’s] inspection of and approval of premises and chattels, subject to [the purchaser’s] approval of the financial...

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