Humber/Ontario Real Estate Course 3 Exam Practice

What distinguishes a condition precedent from a condition subsequent?

1. The condition subsequent can be waived, but not the condition precedent.

2. A condition subsequent agreement requires a termination notice; a condition precedent needs a mutual release.

3. Approval of a third party is needed for a condition precedent's removal; not so for a condition subsequent.

4. An agreement is binding with a condition subsequent but not necessarily with a condition precedent.

5. Conditions subsequent have to be met within a set period; conditions precedent do not.

6. Conditions subsequent relate to future actions, while conditions precedent relate to past actions.

The correct answer is: An agreement is binding with a condition subsequent but not necessarily with a condition precedent.

The answer is correct because it highlights a fundamental difference between the two types of conditions in contractual agreements. A condition precedent refers to an event or obligation that must occur before a party is required to fulfill their part of the agreement; if it does not occur, the agreement is not binding. In contrast, a condition subsequent is an event that can terminate an existing obligation or agreement if it occurs. Thus, agreements can become effective and binding under a condition subsequent even if certain future conditions are not met, whereas a condition precedent creates a scenario where the agreement is contingent upon those conditions being fulfilled. This understanding is crucial in real estate transactions, as it impacts how parties view their obligations and risks concerning the contract. Each type of condition significantly influences how and when legal and financial responsibilities arise, and recognizing these distinctions can aid in navigating and negotiating contractual terms effectively.