Conditions Subsequent: When Obligations End
What Is a Condition Subsequent?
A condition subsequent is an event that, when it occurs, terminates or discharges an obligation that is already in effect. While a condition precedent must be satisfied before an obligation begins, a condition subsequent ends an obligation that has already started.
How Conditions Subsequent Work
The obligation is active and enforceable from the start, but if the specified event occurs, the obligation is extinguished:
- An insurance policy covers a building, but coverage terminates if the owner fails to maintain fire suppression systems (the failure is the condition subsequent).
- A distribution agreement grants exclusive rights, but exclusivity ends if the distributor fails to meet minimum sales targets.
- A license agreement grants usage rights, but the license terminates if the licensee is acquired by a competitor.
Conditions Subsequent vs. Conditions Precedent
| Aspect | Condition Precedent | Condition Subsequent |
|---|---|---|
| Timing | Must happen before obligation starts | Happens after obligation is active |
| Effect | Creates or activates an obligation | Terminates or discharges an obligation |
| Default state | Obligation is dormant | Obligation is active |
| Burden of proof | Party seeking enforcement proves condition was met | Party seeking discharge proves condition occurred |
Common Examples
- Performance benchmarks. Exclusive distribution rights that terminate upon failure to meet annual sales minimums.
- Regulatory changes. Obligations that end if a new law makes performance illegal or impractical.
- Change of control. Rights that terminate if one party is acquired by or merges with a competitor.
- Insurance requirements. Coverage that lapses if the insured fails to meet ongoing conditions.
What to Watch For
- Ambiguous triggering events. The condition subsequent should be clearly defined so both parties know exactly when it has occurred.
- Notice requirements. Does the party invoking the condition subsequent need to provide notice? Within what timeframe?
- Consequences of termination. When an obligation ends via condition subsequent, what happens to pending payments, delivered goods, or partially completed work?
When to Consult a Lawyer
Consider consulting an attorney if you believe a condition subsequent has been triggered in your contract and you are unsure of the procedural steps required to effectuate the termination of obligations.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.