If you have heard the phrase “conditions to closing”, sometimes called conditions precedent, and wondered what it means, you are looking at one of the important mechanics that shape how deals get done. It is really about what has to be true or done before a deal can complete. Let me explain, in general terms, how conditions to closing work in a deal and what lawyers do about them.
Quick answer
Conditions to closing, often called conditions precedent, are, in general terms, things that must be satisfied or completed before a deal can close, or complete. In many deals, there is a gap between signing the definitive agreements and closing, and the deal is structured so that certain conditions must be met during that gap before the parties are required to, or can, complete the transaction.
In other words, they are the “must happen first” items, the requirements that need to be fulfilled for the deal to move from signed to closed. Deals have conditions to closing because, between signing and closing, certain things often need to happen or be confirmed, for example, required steps, approvals or requirements that the parties agree must be in place before completing. Conditions provide a structured way to ensure these are met before the deal completes.
What lawyers do about them: lawyers help identify and negotiate the conditions, what must be satisfied before closing; draft them into the deal documents; and then work to satisfy and track them in the run-up to closing, managing the process of getting the conditions met and confirming they have been before completion.
The exact conditions and how they work vary from deal to deal. The keys are to understand that conditions to closing are the requirements that must be satisfied before a deal can complete, that they bridge the gap between signing and closing, and that lawyers identify, negotiate, draft, and then work to satisfy and track them. General overview; specifics vary by deal; no figures.
What conditions to closing are
Conditions to closing, often called conditions precedent, are, in general terms, things that must be satisfied or completed before a deal can close, or complete. They are the requirements that need to be fulfilled for the deal to move from signed to closed, the “must happen first” items before completion.
In many deals with a gap between signing and closing, these conditions must be met during that gap before the parties complete the transaction.
Why deals have conditions to closing
Deals have conditions to closing because, between signing and closing, certain things often need to happen or be confirmed before it makes sense, or is agreed, to complete the deal. For example, there may be required steps, approvals or requirements that the parties agree must be in place before completion.
Conditions provide a structured way to ensure these are met before the deal closes, protecting the parties and giving order to the run-up to completion. So conditions are a mechanism for managing the “what needs to be true or done before we complete” question.
What lawyers do about conditions
Corporate lawyers are central to how conditions work.
Identifying and negotiating the conditions. Working out and agreeing what must be satisfied before closing, as part of structuring and negotiating the deal.
Drafting them into the deal documents. Setting out the conditions clearly in the definitive agreements.
Working to satisfy and track them. In the run-up to closing, managing the process of getting the conditions met and confirming they have been before completion.
This spans the deal, from negotiating and drafting the conditions to managing their satisfaction before closing, and lawyers’ careful work here is important to getting the deal done.
YLCC ACTION STEP: Understand conditions to closing, conditions precedent, as the requirements that must be satisfied or completed before a deal can close, bridging the gap between signing and closing. Know why deals have them: certain things often need to happen or be confirmed before completing, and conditions give a structured way to ensure that. And know what lawyers do: identify and negotiate the conditions, draft them into the deal documents, and work to satisfy and track them before closing. Remember the exact conditions and specifics vary by deal.
If this is you
If you are heading into deal work: expect to work with conditions to closing. Understanding them helps you see how deals move from signed to closed, and where lawyers manage the process.
If you are curious about deal mechanics: conditions to closing are a key mechanism. They capture what must be true or done before a deal completes.
If you want to understand the lawyer’s role: lawyers identify, negotiate, draft, and then work to satisfy and track conditions, careful work that helps deals get done.
FAQs
- What are conditions to closing? In general terms, things that must be satisfied or completed before a deal can close, or complete, often called conditions precedent. They are the requirements needed for the deal to move from signed to closed.
- Why do deals have them? Because, between signing and closing, certain things often need to happen or be confirmed before completing, and conditions provide a structured way to ensure these are met before the deal closes.
- When do conditions apply? Typically in deals with a gap between signing and closing, the conditions must be met during that gap before the parties complete the transaction.
- What do lawyers do about conditions? They identify and negotiate them, draft them into the deal documents, and work to satisfy and track them in the run-up to closing.
- Are conditions the same in every deal? No. The exact conditions and how they work vary from deal to deal. This is a general picture.
