Polly agrees to buy quinn’s cycle world store business on the express condition that ridgeline credit union approves the financing. This approval is

a condition precedent.

Explanation:

Condition precendents are events which must be fulfilled by parties to an agreement or a contract before it can be said to be in effect.

For a registered firm who is willing to obtain loan for instance , must present the firm's registration certificate with the regulatory body, statement of its audited finance, credit history report, Know your customer(KYC), particulars of the directors, collaterals etc.

Lending companies like banks would normally apply condition precedent as a means of protecting depositors fund to be lent out. The condition precedent would give the lending institution the comfort that the borrower is operating a legal and approved business and that the repayment will be made appropriately.

Also, condition precedent would empower the lending company to be able to appoint a receiver because it has legal documents, who will sell off the borrower's asset to repay the loan in case the firm is not able to pay back the loan or in case of bankruptcy.

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