Legal Updates

A condition precedent may be an event that is not external to the parties to the agreement insofar as this is expressly stated in the agreement

April 4, 2022

Owners of apartments in a condominium attempted to reach understandings to carry out a joint project according to TAMA 38 and signed a cooperation contract stating that the project architectural plans will be attached to the agreement at a later date subject to the agreement of the parties. Once the parties failed to agree on the architectural plans, one of the apartment owners demanded that the agreement be upheld based on the architectural plans in dispute.

The Court held that agreement regarding the architectural plans was a condition precedent for the existence of the contract and therefore its enforcement or existence could not be determined without such consent. The cooperation contract is a closed contract and an exhaustive contract which terms are clearly defined and therefore will be interpreted in accordance with the intention of the parties as reflected in its wording. Here, the contract is explicitly worded as a suspended agreement, which sets the consent of the apartment owners to the architectural plans as a condition precedent for its existence. While in most cases, conditions precedent are conditions that depend on external parties who are not parties to the agreement, there is no impediment to parties to a contract setting conditions that depend on the parties themselves and not on any third party. Here, the detailed contract signed between the parties after negotiations and consultation with lawyers, explicitly states that the plan approval is a condition precedent without which the contract can not be upheld, and the fact that a party to the contract can theoretically refuse to agree and reap the benefits of such non-fulfillment of the condition, does not derogate from the validity of such condition. Therefore, the contract cannot be maintained or enforced until the parties agree on the plan as stipulated in the contract.