Closing condition (condition precedent)
A closing condition, or condition precedent, is something that must be satisfied or waived before a party is obliged to complete the transaction. If a condition is not met by the deadline, the party it protects can usually walk away without penalty.
Conditions are how a signed agreement can exist weeks before anyone actually completes. They give each side a defined list of things that must fall into place, and a clear exit if they do not — which is what makes it safe to sign before every consent has been obtained.
Conditions a buyer commonly requires
- Financing on acceptable terms
- Satisfactory completion of due diligence
- Landlord consent to the lease assignment
- Franchisor consent, where applicable
- Key employees signing employment or retention agreements
- Licences and permits confirmed transferable, or the buyer’s own approved
Why deadlines matter more than the list
A condition without a date is an open-ended option, and a seller who grants one has taken their business off the market indefinitely. Every condition should carry a deadline, a mechanism for waiving it, and clarity about what happens to any deposit if it fails.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentSelling a business
- 02Treadstone LawLegal commentaryConditions Precedent to Closing in an Ontario Business Sale Agreement
- 03Treadstone LawLegal commentaryGetting Landlord Consent to Assign a Commercial Lease in an Ontario Business Sale
- 04Treadstone LawLegal commentaryFranchisor Consent to Transfer
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