Condition Precedent or Subsequent: The Misnomer That Ruins a Property Sale

Imagine: you are selling your house in Pont-Saint-Esprit, subject to obtaining a loan. The bank refuses. You think the contract is "rescinded" and you can sell to another buyer. But the buyer claims the condition was "precedent" and that the contract is simply void, without compensation. Who is right? This apparently technical question divides the courts and could cost you thousands of euros. The Court of Cassation, in a judgment of 1 July 1975, ruled: a condition precedent can never produce the effects of a condition subsequent. Explanations.

The Facts: A Story That Happens Every Day

In 1971, the company Air Algérie signed a contract to acquire a building in Paris. The contract was subject to a condition: obtaining approval from the Algerian financial authorities. Both parties agreed that this was a condition precedent. But approval was not obtained. The seller sued Air Algérie to have the contract "rescinded" and to obtain damages. The Paris Court of Appeal, in 1973, ruled in favour of the seller: it declared the contract "rescinded" and ordered Air Algérie to pay damages. Problem: if the condition is precedent, the contract never existed until it is fulfilled. To say it is "rescinded" gives it retroactive effect, characteristic of a condition subsequent. The Court of Cassation censured this contradiction: you cannot both characterise a condition as precedent and apply the effects of a condition subsequent.

The Reasoning of the Court — Analysed

The judges' reasoning is simple: each condition has its own effects. A condition precedent (Article 1304 of the Civil Code, now Article 1304-1) suspends the existence of the contract until it is fulfilled. If it is not fulfilled, the contract is void: it has never produced any effect. A condition subsequent (Article 1304-6 of the Civil Code) retroactively annihilates an already valid contract. In this case, the Court of Appeal made a logical error: it characterised the condition as precedent, but ordered the "rescission" of the contract, which presupposes a condition subsequent. The Court of Cassation therefore set aside the appeal judgment. This is neither a reversal nor an evolution, but a confirmation of the general law of conditions. The lower courts must be consistent: the choice of characterisation imposes specific legal consequences.

What This Means for You — Practically

For seller-owners: if you sell your property in Le Vigan subject to a condition precedent of obtaining a loan and the loan is refused, you cannot claim damages from the buyer. The contract is simply void. On the other hand, if the condition was subsequent (for example, the buyer undertakes to sell their own property within a time limit, failing which the sale is rescinded), you can claim damages. For buyers: if you are acting in good faith and the condition precedent is not fulfilled, you are released without penalty. However, be careful: if you yourself prevented the fulfilment of the condition (for example by not submitting your loan application), you could be ordered to pay damages. undefined, I have encountered cases where the buyer, in order to withdraw, did not provide the necessary documents for obtaining the loan. The judges then considered the condition to be deemed fulfilled and ordered the buyer to complete the transaction. In other words, bad faith does not pay.

Four Tips to Avoid This Type of Dispute

• Clearly characterise the condition in the contract: do not use ambiguous terms. Write "condition precedent" or "condition subsequent" in full, and specify the consequences.
• Include a default clause: indicate what happens if the condition is not fulfilled: void without cost (precedent) or rescission with damages (subsequent).
• Respect deadlines: if you are the buyer, submit your loan application promptly and keep evidence (acknowledgment of receipt, reminders).
• Use a professional: a notary or a lawyer specialising in property law will draft a bespoke clause. Avoid generic templates found on the Internet.

Further Reading: Related Case Law and Developments

The Court of Cassation has confirmed this position several times. For example, in a judgment of 17 February 1976 (No. 74-14.708), it held that the failure of a condition precedent can only give rise to damages if a penalty clause expressly provides for it. More recently, the Court of Cassation reminded that a buyer who does not comply with their good faith obligations in fulfilling the condition precedent may see the condition deemed fulfilled (Civ. 3e, 15 March 2018, No. 16-28.616). The trend is therefore towards protecting the buyer, except in cases of proven bad faith. For the future, it is advisable to clearly distinguish between the two types of conditions in preliminary contracts and to include substitution clauses in case of default.

Summary and Next Steps

• What to do if the condition precedent is not fulfilled? Nothing: the contract is void. You can sell to another buyer without risk.
• What to do if the condition subsequent fails? You can apply for judicial rescission of the contract and damages.
• Can I claim estate agency fees if the condition precedent fails? No, unless there is a clause to the contrary. The agency cannot demand its commission.

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