All agreements, whether verbal or reduced to writing, have terms and conditions. The meaning and effect of the two concepts are however very often confused.
The terms of an agreement are the undertakings the parties give to each other to make up their agreement.
To use an agreement for the sale of land as an example. Terms would be the statement that it is a sale, the description of the property that is the subject of the sale, the purchase price and the method of payment, the date of occupation of the property by the purchaser, the occupational rental payable for such occupation, and similar.
A condition on the other hand is the insertion of a provision in the agreement that determines or affects the existence of that agreement.
There are two types of conditions that may be applicable:
1. Suspensive condition (also known as a condition precedent): as the name suggests, a suspensive condition is one which suspends the operation of the parties’ obligations until the happening of a specified event.
Using the sale agreement as an example, it could be made subject to the condition that the purchaser secures a loan to pay the purchase price of the property within a specified time period. Should the loan not be obtained within the agreed time period, the agreement would lapse ie fall away with neither party to it having a claim against the other arising from the conclusion of the agreement. The status of both parties at the time the agreement was concluded is then restored. This means that if the purchaser has for example paid a deposit as required by the terms of the agreement, that deposit would be refunded to him.
If on the other hand, the loan is obtained by the buyer within the agreed time, the agreement becomes unconditional retrospective to the date on which it was concluded. Both parties would then have to comply with their respective obligations as set out in the agreement.
In this context, there is an interesting concept known as the doctrine of fictional fulfillment. If the purchaser in our agreement of sale deliberately frustrates the grating of the loan applied for and that loan would have been granted were it not for the purchaser’s obstructive conduct, the condition will be deemed to have been fictionally fulfilled.
2. Resolutive condition: a resolutive condition on the other hand is one which, when fulfilled, can terminate the existence of the agreement.
The agreement can for example be made subject to the condition that a specified person does not die within a specified period. Should that event take place, the agreement will come to an end.
The agreement is valid as against both parties from the time it is concluded subject to the possibility that the resolutive condition is fulfilled. If it is fulfilled, the agreement will fail. Here too the parties’ status quo ante would be restored.
The difference between the two is, therefore, best summarised as follows: fulfillment of a suspensive condition creates an agreement while the fulfillment of a resolutive condition may terminate an agreement.