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Condition Precedent

Condition precedent exists when a situation or circumstance has to be achieved, or action needs to be taken in order for one of the other party’s side of the contract to be considered valid. An example of this situation may be Joe offering to sell his car to Jim, as long as Jim can provide say, proof of insurance and a driver’s license. Assuming Jim has a driver’s license and has/can obtain auto insurance, the two parties can move forward.

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Joe will have agreed to sell the car to Jim. On the other hand, should Jim be incapable or unwilling to provide a license and insurance, Joe is not obligated to sell the car to Jim.

In the case mentioned in the text, health insurance is often provided depending on a potential client’s current physical condition. In other words, insurance protect themselves from covering individuals who may be what they consider to be a liability. This example is a clear cut demonstration of how the insurance company protects its own assets by “conditions precedent”(Clarkson, Miller & Cross, 2011). Conditions subsequent strikes me as a bit more abstract of a concept than condition precedent, by virtue of its inherently negative nature.

Put another way, one party’s obligation may be terminated based on the failure of the second party to maintain it’s side of the contract. As it applies to employment, and as was mentioned within the text, an employer may agree to enter into a contract with an employee so long as the employee maintains his or her license to practice (i. e. perform a task to the company’s benefit). In a situation where the employee fails to maintain his/her end of the agreement (loses license, fails to maintain condition, etc. the company is no longer under contract to continue employing that individual (Clarkson, Miller & Cross, 2011). The benefit lies largely with the company-protecting its own assets, as it would not be beneficial to have a lawyer on staff incapable of maintaining a license to practice law. On the other hand, the employee may be able to see a definite benefit as well. He or she knows that the position is hers as long as she meets and maintains her side of the contract. Lastly, concurrent conditions, strike me as being the most common conditions we’re likely to come across.

They occur in many everyday transactions with businesses by their very nature; which is that duties or actions be met simultaneously between both parties in order for a contract to be valid. In most business transactions, at retail or otherwise, occur when the consumer offers to provide money in exchange for a good or service. The service provider may perform the task and send an invoice, or merchant may agree to sell the product with a promise to pay (such as with credit cards, checks, and credit account) later. But in most cases, the item is given to the consumer once payment is received and payment usually immediately follows a service.