Condition precedent clause: what must happen before completion

Sample clause

Written for the purchase of Laneway Espresso, a fictional Melbourne cafe business, by a new owner from the founder.

Conditions Precedent. (a) Completion is conditional on: (i) the Landlord consenting in writing to the assignment of the Lease to the Buyer on terms reasonably acceptable to the Buyer (the Lease Condition); and (ii) the food business registration for the Premises being transferred to, or issued in the name of, the Buyer (the Licence Condition). (b) The Seller must use reasonable endeavours to satisfy the Lease Condition and the Buyer must use reasonable endeavours to satisfy the Licence Condition, and each must keep the other informed of progress. (c) The Lease Condition may be waived only by the Buyer. The Licence Condition may be waived only by agreement of both parties. (d) If the Conditions are not satisfied or waived by 5.00 pm on 30 April 2027 (the Long Stop Date), either party may end this agreement by written notice, and the Seller must refund the deposit.

Sample wording, not legal advice.

Variants

What to negotiate

• Who must satisfy each condition

  Each condition should name the party responsible and the effort required. A seller is usually best placed to obtain a landlord's consent; a buyer to get its own licence or finance. Without an allocation, a party may do nothing and then rely on the condition failing to escape a deal it no longer wants. Courts may imply a duty to cooperate, but express drafting is safer.

• Reasonable endeavours or best endeavours

  The level of effort matters. Reasonable endeavours generally requires one reasonable course of action, balancing the party's own interests; best endeavours requires more, and may require taking steps against the party's interests. All reasonable endeavours sits between them. Parties should pick the standard deliberately and, where possible, list specific steps such as applying within 5 business days.

• The long stop date

  A long stop date gives certainty: if the conditions are not met by then, the deal can end. Too short, and a slow landlord can kill a good deal; too long, and the parties are tied up while the business changes. The clause should say whether the date can be extended and what happens to any deposit if the contract ends.

The risk of leaving it out

Without a condition precedent clause, a buyer who signs an unconditional contract must complete even if the landlord refuses to transfer the lease, leaving it with a business it cannot trade from. Without a long stop date, a conditional contract can stay alive indefinitely, preventing the seller from selling to anyone else.

A conditions tracker

A tracker table keeps a conditional deal moving. Columns: condition; responsible party; first step and deadline, such as landlord consent application lodged by 15 March; status; who can waive; and evidence of satisfaction, such as the signed deed of assignment. For Laneway Espresso, the lease condition sits with the seller, who applies to the landlord with the buyer's financial and references, and the licence condition sits with the buyer, who applies to the council. Updating the tracker weekly and sharing it avoids surprises at the long stop date. Law checked on 21 October 2026. This page explains how the clause works and is not legal advice.

Conditions in Australian business sales

For many small business sales in Australia, the key conditions are the landlord's consent to assign the lease, transfer of licences and permits, and sometimes finance. For retail premises, state retail leases laws, such as Victoria's Retail Leases Act 2003, regulate when a landlord can withhold consent to an assignment and the information it can ask for. business.gov.au's guidance on buying an existing business lists the checks a buyer should make, many of which become conditions in the contract.

Waiver

A condition that protects only one party, such as due diligence for a buyer, is usually waivable by that party alone. A condition required by law, such as a regulatory approval, usually cannot be waived at all, because completing without it would be unlawful. The clause should say who can waive each condition, as the sample does, so there is no argument when one party wants to proceed without it.

Conditions and contract terms

Lawyers distinguish conditions precedent to the contract coming into existence from conditions precedent to performance. The difference affects whether the parties are bound to try to satisfy the condition and whether either can walk away beforehand. Most commercial clauses are conditions to performance, with express duties to cooperate, which is the structure the sample uses.

Documents that carry this clause

Letter of intent template for buying a businessA letter of intent is the deal on one page, written before either side has spent money on lawyers, and its only binding parts are the promises that make spending that money safe. This example records a cafe acquisition of up to $1,228,000 with an earn out, gives the buyer 45 days of exclusivity, and numbers the paragraphs that bind.Loan agreement templateA Tasmanian foundry is borrowing $180,000 from a private investment company to buy a used induction furnace. The lender is not a bank, so everything a bank would take for granted has to be written down: what has to happen before the money moves, what is registered over what, and how long the borrower gets to fix a default.Option to purchase agreement with a fee, a window and a caveatAn option to purchase buys time rather than land. The grantee pays a fee for the exclusive right to buy at a fixed price within a set window, and can walk away without buying anything. This one gives a developer 18 months over a 3.4 hectare block at Woodford for $25,000, at a fixed price of $1,400,000.

Questions people ask