Rule 10 – Both parties benefit from a condition…

This blog post elaborates on my series of best practice rules on ‘drafting conditions’ (for the latest post, click here). This one discusses the effect of a condition: its being for the benefit of both parties, unless the contracts stipulates otherwise.

10)    Conditions are for the benefit of both parties, unless otherwise specified.

For example, in respect of a choice of court, one party may need to prevent that it cannot effectively take recourse on the other party as a consequence of complications in the enforcement of a (favourable) court decision:

Section 11.2 is for the benefit of the Pledgee only. For the avoidance of doubt, subject to the applicable law, the Pledgee may initiate concurrent proceedings in any number of jurisdictions.

Obviously, the benefit of a condition is often determined by the context in which the condition applies. A technique to identify the beneficiary of a condition is to use the active tense, to personalise (or to ‘de-nominalise’) the related obligation or right (see my blog post here about denominalisation).

In large transactions with several conditions, a separate section can be included to identify which conditions are for the benefit of which party (or both parties). The identification would also specify that the relevant party is entitled solely to waive the condition. For example:

Benefit. The Conditions under 2.1(a), (e), (f) and (g) are for the benefit of Purchaser and may be waived by Purchaser. The Condition under 2.1(b) is for the benefit of Sellers and may be waived by each Seller. The Conditions under 2.1(c) and (d) are for the benefit of all Parties and may be waived by Purchaser and a Seller acting jointly.

Note how practical complications of more than one seller (who would each need to waive its right) are avoided by creating authority of each seller to bind all.

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