Conditional: Definition, Example and Related Terms
What is a Conditional ?
In the world of commercial contracts, a 'Conditional' is a term that refers to certain requirements or actions that must be fulfilled for the contract to be fully valid or for a particular aspect of the contract to take effect.
SOMETHING will only happen IF something else happens.
It's a bit like when you're playing a computer game and you can only unlock the next level if you achieve certain things in your current level. In a contract, these 'things' can be payments, delivery of goods, performance of services, or any other actions that the parties agree on. These conditions ensure that each party fulfills their part of the deal, and if they don't, the contract may not be valid or certain parts of it may not happen. It's a way of making sure everyone plays fair and does what they promised to do.
Example(s)
Scenario Description A company is hiring a marketing firm to help promote their new product. The contract includes a clause that the marketing firm will only be paid their full fee if the product achieves a certain level of sales. In this scenario, the payment of the full fee is 'Conditional' on the product achieving a certain level of sales. This means that the marketing firm only gets their full fee if the product sells well. It's a way of making sure the marketing firm does a good job. If they don't, and the product doesn't sell well, they don't get their full fee. A business enters into a contract with a supplier for the delivery of raw materials. The contract states that the business will only pay for the materials if they are delivered by a certain date. Here, the payment for the materials is 'Conditional' on the materials being delivered by a certain date. This means that the supplier only gets paid if they deliver on time. If they're late, they might not get paid. This is a way for the business to make sure the supplier delivers on time.