What does a condition precedent refer to?

A condition precedent refers to an act or event that must occur before a party is obligated to perform a contractual duty or before a right can be granted under the terms of a contract. This is crucial in understanding how contractual obligations are structured; it establishes a timeline of events that must take place for the contract to take effect.

For instance, if a contract states that a party must secure financing before purchasing a property, the financing is a condition precedent. Until that financing is obtained, the obligation to finalize the purchase does not arise, effectively delaying the execution of the contract.

Other options do not accurately capture the essence of a condition precedent. An act happening after a right is granted pertains more to subsequent conditions or obligations rather than preconditions. An event that can terminate a right aligns more with conditions subsequent, which extinguish rights after they have been initiated. Lastly, a condition without effect on a contract is contradictory, as any valid condition in a contract serves a purpose in governing the parties' responsibilities and rights. Thus, recognizing that a condition precedent is inherently about establishing necessary preconditions for obligations reinforces why this choice is correct.