Key takeaways
- The investment case should connect technical evidence, contractual allocation and capital decisions.
- Project risks are most manageable when they are identified before they become embedded in execution.
- Governance should remain proportionate to materiality and lifecycle stage.
A CP is a control, not a checklist
Conditions precedent are most useful when they convert unresolved transaction risks into objective requirements that must be evidenced before an obligation becomes effective or capital is released.
Good CPs share four characteristics
- Objective: the condition can be tested against a defined fact or document.
- Documentary: evidence of satisfaction is capable of being retained and audited.
- Verifiable: responsibility for confirmation is clear and not dependent on vague discretion.
- Consequential: failure to satisfy the condition has a defined contractual or governance outcome.
Where CPs add the most value
They are particularly useful around project rights, approvals, financing, security, insurance, technical deliverables, construction readiness and counterparty obligations. They can also protect against premature payment where project maturity is still being established.
Avoiding CP inflation
Not every deliverable should become a condition precedent. If the list is overloaded with immaterial items, teams may lose sight of the risks that genuinely justify withholding closing, drawdown or notice to proceed.
FRANENSA perspective
FRANENSA uses conditions precedent as part of a wider control architecture linking investment approval, contractual readiness, financing and capital release.