Contract Glossary
Contingency
Definition
A condition or event that must occur (or not occur) before a contract becomes binding or before a party is required to perform. It's an 'if/then' in the contract — if this happens, then we move forward. If it doesn't, we can walk away.
In Practice
The most common example is a financing contingency in a real estate deal: 'This sale is contingent on the buyer securing a mortgage within 45 days.' If you can't get the loan, you can cancel the purchase and get your deposit back. Business contracts use contingencies for regulatory approval, due diligence results, or securing key partnerships.
Common in these contract types
Related terms
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Frequently asked questions about contingency
They're closely related. A contingency is the broader concept — a future uncertain event that affects the contract. A condition precedent is the legal mechanism — a specific requirement that must be met before an obligation activates. Most contingencies are structured as conditions precedent, but the terms aren't perfectly interchangeable.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.