A condition precedent was the issue in Preston Exploration Company, et al v. Chesapeake Energy Corporation. This opinion was the result of the parties’ second visit to the federal Fifth Circuit Court of Appeals. In the first trip, the issue was whether the Purchase and Sale Agreement between the parties in a $110 million transaction satisfied the statute of frauds. The court ruled in that opinion that it did. (See this post discussing that opinion.)
Condition precedent: An event or condition that must be performed by one party before he can require the other party to perform. (Looking to get righteous? Check out Mathew 7:3.)
Before closing, Chesapeake objected that Preston did not have good title to certain properties. Preston responded that it would give marketable title at closing. Cheasapeake refused to attend the closing and litigation ensued. The court, referring to its 2012 opinion for details, determined that the condition precedent – to have marketable title, that is, title that a reasonable and prudent person in the industry would accept - had been satisfied. The trial court’s judgment for Preston was affirmed, and the parties were put out of their litigation misery.
Let’s skip the legalities and head straight for the place where business people live. It is a truism among those of us who trade in disputes for a living that your contract is only as good as the intentions of the party you have contracted with. If your counterparty has pockets that are deep enough and a desire to avoid his obligation that is strong enough, he can delay your payday for a long, long time, maybe forever.
Current Chesapeake management can be consoled by the fact that this problem was caused by the last, deposed regime.
For our musical interlude – unrelated to the issues in the post – let’s evaluate tawdry, guilt-driven extra-marital escapades. We have two choices:
A different take on an old favorite of mine and
a country standard.