The condition for which the contract was concluded must be a future event and must be uncertain. If the performance of the contract depends on an event that is a future event but occurs safely, it will not be considered a conditional contract. Excellent points in this article! When we had to add a room to our home for our next child, I negotiated a completion date (one month before our child`s date of birth). For each day of delay, the contractor was fined $250 per day. The human factor of compassion with a pregnant woman in combination with punishment is a great combination. In addition, we had specific plans for the client and an independent inspection to objectively determine what “project completion” means. I`d like to hear from the author how contingency agreements “evolve” when it comes to owners selling their business to private equity groups (or professional investors). Often, owners want a higher valuation than the industry`s traditional multiplications. And the owner believes that the company is stronger and more growth-oriented than external people. But the owner is reluctant to sign a conditional purchase agreement.
To see how it works, imagine two companies, one based in the US and the other in Europe, discussing the formation of a joint venture to market the other`s product. The U.S. company is confident it will be able to sell $50 million of the European product in its first year, but the European company thinks that estimate is far too optimistic. The word “potential” means when an event or situation depends on another event or fact. “Conditional Agreement” means that the applicability of this Agreement depends directly on whether or not a cause arises. The word was used in the Indian Contract Act of 1872 to mean conditionally. Uncertainty is an indication of the future. As we have seen in the case of Sanofi and Genzyme, if two parties legitimately argue over the future outcomes that will affect their agreement, they may be able to fill the void by betting on their beliefs and negotiating a conditional agreement.
Conditional agreements are common in M&A, professional sports and construction projects.