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How a New York Contract Can Be Broken Before It Even Starts


You might be under the impression that once you have a signed agreement, there is no way out. In most instances (at least in New York), that's true; but there are some critical exceptions, chief among them being the failure to fulfill an underlying assumption (or, in legalese, a "condition precedent") to the agreement.

To that end, New York's courts have articulated the rule as follows:

"A condition precedent is 'an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises'" [citations omitted] (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 690 [1995]; see also U.S. Fidelity & Guar. Co., 369 F3d at 51; 120 Greenwich Development Associates, LLC v. Reliance Ins. Co., 2004 WL 1277998, [SD N.Y.2004] ). "Express conditions must be literally performed" (Oppenheimer, supra, at 690). Substantial compliance with a condition precedent is insufficient (see Id. at 692-693; see also MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 654 [2009] ; East 49th Street Development II v. Prestige Air & Design, LLC. 33 Misc3d 1205[A])."

In other words, unless and until a condition precedent is fulfilled, there is no enforceable contract under New York law. Not suprisingly, there has been a significant amount of litigation over conditions precedent to otherwise binding agreements.

One area where this issue has come up rather frequently is in the context of real estate litigation, where the parties have argued over whether each side was ready, willing and able to close on a particular property.

It should also come as no surprise that the legal determination as to what the condition precedent was - or whether it was fulfilled in a given situation - is a fact-specific inquiry that must be decided on a case-by-case basis.