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20180503 What is conditional contract?

20180503 (Thu)

What is conditional contract? When does it become unconditional?

When two parties come to a negotiation, many things are not yet certain. If I get my wife to agree, I can go watch football with you. This is an example in real life. But, the legal example would be – if I can get bank loan, then I can buy your property.

Hence, most of the conditions are still uncertain in a property transaction at the point of negotiation. When an offer is made, there is still condition attached to it. For the above example, the agreement to purchase is still conditional and therefore, there is no contract. When there is uncertainty – bank loan application may be unsuccessful, the instruction has not been fully carried out – no successful sale. Therefore, payment of fee or commission at this stage is pre-matured thus, it is wrong to charge agency fee at this time. Exception is when it is not a fee but a marketing expense, for example taking a flight to view the outstation property with buyer. Claiming that flight ticket is not a professional fee but a marketing expense or disbursement. In rare cases, the principal (seller or landlord) can agree to pay fee in another arrangement by written agreement. This is an exception and not a norm.

Otherwise, fee for the job done is only payable when all conditions become unconditional, which is at the time of signing tenancy agreement or sale and purchase agreement.

Standard 4 MEAS 2014

4.2.5 Notwithstanding 4.2.4, the firm and the client may agree to vary from the general rule and agree to specific terms and conditions on payment of fees. Such an agreement must be in writing.

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