Understanding Contractual Conditions: Types & Compliance
Contractual Conditions: Concept and Nature
Article 1113 of the Civil Code states that a condition is the dependence of the effects of a contract on an uncertain future event, or a past event unknown to the stakeholders. Uncertainty is the defining characteristic of a condition; it is not known whether the event will occur (objective uncertainty), or whether it has occurred (subjective uncertainty).
The condition affects the production of effects of the bargaining, not the business itself. The condition is not assumed, so proof of its existence is required by the person alleging it.
Classes of Conditions
Precedent and Resolutive Conditions
Precedent conditions are those in which the acquisition of rights depends on the event constituting the condition. The contract exists, but its effectiveness remains suspended. Resolutive conditions are those where the loss of rights already acquired depends on the event constituting the condition, and therefore generate ab initio effect, terminating the contract.
Optional, Random, and Mixed Conditions
Optional conditions depend on the will of one of the subjects in the transaction. Random conditions depend on circumstances foreign to that will (for example, luck or the will of a third party). Mixed conditions are partly potestative and partly by chance (for example, “we’ll donate X if you marry Juana”).
Impossible, Illegal, and Immoral Conditions
Impossible conditions are those in which the event is not verifiable due to physical causes (for example, “give you X if you take the sky by hand”) or legal causes (e.g., “I’ll give you X if John reaches the age of majority at 15 years”). If the condition was not doing something impossible, it will not start. Illegal and immoral conditions are those resulting from an event whose realization is contrary to mandatory law, public order, or morality.
Positive and Negative Conditions
In positive conditions, business efficiency depends upon the fact that some event occurs. In negative conditions, the effectiveness of the business depends upon the fact that the event did not happen. The problem arises because you can express an event grammatically in both positive and negative terms (for example, a donee or legatee can be told that if he marries, he will receive X, or if he remains unmarried).
Compliance with the Condition: The Retrospective Effect
The legal situation that occurs when the condition is fulfilled is regulated under the principle of retroactivity, as to the obligations arising from the contract to the day of its perfection. With respect to doing or not doing, the courts have to determine in each case the effects of retroactive.
The Fictitious Obligation Compliance
Article 1119 of the Civil Code stipulates that the condition shall be fulfilled when the obligor voluntarily prevented its implementation. The rationale is that the conclusion of a conditional business imposes on the parties a duty to behave in accordance with good faith, so that the conditioning event goes smoothly according to expectations.
The Conditio Iuris
Doctrine has traditionally discussed the possibility of legal conditions or conditio iuris alongside voluntary conditions. The conditio iuris is the subordination of the legal business efficiency, by operation of law, upon a future uncertain event and characterized by having elements that are, by the will of the order, made on the assumption required to give place to trigger legal effects. It is, therefore, a legal budget of business efficiency.