In a sale and purchase agreement for an M&A transaction, a condition precedent is a condition which must be fulfilled in order for the sale and purchase to proceed.

A clearly drafted condition precedent clause should include the following:

1. What is the desired outcome/condition precedent to be fulfilled?

2. Who is the responsible to fulfil each of the conditions precedent?

3. If a party fails to fulfil the condition precedent which is that party’s responsibility to fulfil, whether the other party has the right to waive the condition precedent?

4. The deadline to fulfil the conditions precedent.

5. If any of the conditions precedent relates to approval from regulators, government bodies or third parties, whether that condition precedent is fulfilled only if the conditions imposed in relation to the approvals are satisfactory to the parties and the approval is not revoked prior to completion of the sale and purchase.

6. What evidence is required to show fulfilment of the conditions precedent?

7. When does the evidence need to be delivered to the other party?

Typically, failure to fulfil the conditions precedent means the sale and purchase agreement will come to an end.

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This post was first posted on Linkedin on 24 November 2022.