---
title: "What Is Condition Precedent?"
term: "Condition Precedent"
description: "A condition precedent is a requirement that must be satisfied before a contract obligation kicks in—such as closing a financing only after regulatory approval or charter amendment."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/condition-precedent
---

# What Is Condition Precedent?

> A condition precedent is a requirement that must be satisfied before a contract obligation kicks in—such as closing a financing only after regulatory approval or charter amendment.

**Condition precedent** (CP) is an event or deliverable that must occur before parties become obligated to close a transaction.

## How it works

Stock purchase agreements list CPs: board and stockholder approvals, amended charter filed, legal opinions, no material adverse change, key employee agreements signed, third-party consents, and regulatory clearances if applicable. Each party certifies satisfaction at closing; unsatisfied CPs allow termination unless waived. Venture rounds often have lighter CP sets than large M&A, but IP assignment, 409A compliance, and cap table accuracy recur. Long-stop dates cap how long conditions remain open. Waivers require consent—sometimes unanimous among investors. Materiality thresholds define what breaches count.

## Why it matters

- **Founders:** Build a CP workback schedule from target close date. Missing secretary's certificates or stale 409A blocks wires.
- **Investors:** CPs limit closing into undisclosed litigation or broken cap tables. MAE clauses protect against intervening disasters.
- **Counsel:** CP checklists drive closing binders; parallel workstreams prevent sequential delays.

## Common mistake

Treating investor diligence as finished while CPs remain open. Diligence comfort is not the same as legal satisfaction of closing conditions.

## Related ideas

Conditions precedent (plural usage), closing, material adverse change, bring-down certificate, and waiver letter are standard deal-closing terms.

## FAQ

### What is a condition precedent in simple terms?

It is a 'before we are obligated' checklist item—if it does not happen, the other side can walk away without closing the deal.

### Why does a condition precedent matter?

Slipped or failed conditions delay or kill closings. Founders must assign owners early for each CP; investors use them to protect against closing into unknown liabilities.


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Source: https://venturecapitaltracker.com/glossary/condition-precedent