Jurisdiction(s):
United Kingdom

Key definition

Conditions precedent definition

What does Conditions precedent mean? Conditions precedent are contractual requirements that must be satisfied or waived before a contract becomes effective or a party may exercise a right, such as drawing under a loan. They are a descriptive concept recognised in case law on contract formation, rather than defined by statute, and are used across financing transactions. In leveraged finance, CPs are commonly grouped into CPs to signing/effectiveness and CPs to closing/utilisation. CPs to signing are items to be met by the borrower before the facility agreement takes effect (for example, authorisations and certain regulatory consents). CPs to closing are those that must be...

Conditions precedent in loan transactions: timing, documentary and factual CPs, lawyers’ roles, checklists, legal opinions and handling waivers before drawdown

Published by a LexisNexis Banking & Finance expert

Practice notes

Timing

This stage often coincides with the period in loan transactions when the finance documents are being prepared and negotiated (see Practice Note: Finance documents phase in loan transactions). Once lawyers begin drafting the facility agreement, a schedule of conditions precedent that the borrower must deliver to the lender (or the facility agent in a syndicated transaction) before it can sign the facility agreement and/or draw down funds under it will start to crystallise. As part of transaction management, the lender’s lawyers will typically produce a checklist of the conditions precedent (the CP checklist) to track the status of each relevant condition precedent, circulating it to all parties for review while the finance documents are being negotiated. The borrower, or the borrower’s lawyers, will then provide the various conditions precedent documents to the lender or the lender’s lawyers for review. Depending on the nature of the condition precedent document, some may call for negotiation. It is also essential that the borrower’s lawyers keep themselves fully up to date with the progress and status of the conditions precedent to minimise the potential for any delays...

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Web page updated on 21/05/2026

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