Conditions precedent and indemnities

The use of certain conditions which allow purchase and sale agreements to be voided without any liability to either the vendor or purchaser are discussed. The drafting issues that arise when preparing these conditions are described and some common types of conditions precedent found in oil and gas purchase and sale transactions are explained. A 'conditions precedent' was defined as being something which must happen before an interest can vest or grow or before an obligation can be performed. Vendors and purchasers use conditions precedent to provide protection against having to conclude a transaction in circumstances that are not acceptable to them. The manner in which indemnity provisions in an oil and gas purchase and sale agreement work, is also explained. These usually relate to breaches of the contract by either vendors or purchasers. Indemnity clauses are used to allocate risk between the vendor and the purchaser and to set out the mechanics by which either party may make a claim against the other. Ways in which to prepare indemnity clauses are described. 2 refs