What Does
Closing Condition Mean?
A closing condition is an obligation that each party must satisfy in the time period between the acquisition agreement and actual closing.
Divestopedia Explains Closing Condition
Closing conditions are found in a purchase and sale agreement whereby both the target and acquirer have conditions that must be met or waived, and may also include joint conditions. Conditions may include any of the following:
- Provision of closing certificates that state representations and warranties have been satisfied by both parties
- Provision that each party’s representations and warranties are valid as of the closing and/or signing date
- Approval by governmental authority for the transaction to take place, if applicable
- Provision of fully executed ancillary documents by both parties
- Condition by the seller that the buyer has met the purchase price
- Deal specific conditions by the buyer that specific issues are addressed, such as pending liabilities
- Joint condition that no pending litigation would prevent the deal from closing
- Buyer condition that the seller obtains consent from third parties, such as suppliers
- Joint condition that the transaction is legal by law
Failure to meet any of the obligations gives either party the right to terminate the transaction.