Key takeaways
‘If…then’ clauses may create binding conditions
Courts confirmed that conditional wording can trigger strict obligations.
Missing a procedural step can cost your claim
Failure to issue a required report blocked DBS’s delay damages.
Clear contract language is critical for enforcement
Even without time limits, clauses can still be legally binding.
Whether a clause truly amounts to a condition precedent is generally a question of contractual interpretation, often carrying with it severe implications. In the case of Disclosure and Barring Service -v- Tata Consultancy Services Ltd [2025] EWCA Civ 380 (04 April 2025), the court provided some useful guidance as to when condition precedents will arise.
What is a condition precedent?
A condition precedent is a stipulation in an agreement which must be satisfied by one party before a related right or obligation comes into effect. A condition precedent may arise notwithstanding that it is not expressly identified as such in the agreement, subject to the general rules of contractual interpretation.
In some instances, the entire contract may be subject to a “pre-condition” to contract (e.g., planning permission, funding etc), meaning that the contract will not be binding and enforceable until the specified condition or requirement has been fulfilled.
More commonly, particularly in a construction context, contracts may incorporate certain performance provisions (e.g., a notice requirement) which amount to a condition precedent, meaning a specific right or obligation will only come into effect once the performance provision has been satisfied (e.g., entitlement to additional time and/or loss and/or expense).
The facts in Disclosure and Barring Service -v- Tata Consultancy Services Ltd
The salient facts of the case are as follows:
DBS entered into an agreement with TCS to digitise and streamline their previously paper-based disclosure and barring checks (“the Contract”).
Due to delays, quality issues and alleged software defects with the services being provided by TCS, claims were brought by both parties to the Technology and Construction Court (“TCC”).
TCS’s claim was in the region of £125m whilst DBS’s counterclaim amounted to around £100m.
The TCC capped TCS’s liability at £10m in the aggregate, and it was concluded by Constable J that delay damages for each party was subject to conditions precedent.
TCS was awarded just under £5m, whilst DBS was permitted leave to appeal.
DBS were only granted permission to appeal on the ground of whether clause 6.1 of the Contract amounted to a condition precedent.
Pausing there, it is illustrative to set out Clause 6.1 in full:
"If a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to the CONTRACTOR's Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR…... The AUTHORITY will then have the options set out in clause 6.2."
In short, Clause 6.1 provided that a Non-conformance Report was required to be issued by DBS in order for it to have the options in Clause 6.2.
Amongst the options available to DBS was the ability to claim delay payments from TCS (under clause 6.2.3).
TCS’s argument focused on clauses 6.1 and 6.2. It was their case that DBS was only entitled to recover the delay payments referenced within clause 6.2.3, if they had first complied with clause 6.1, more notably, if they had provided TCS with a non-conformance report.
DBS refuted this and stated that a non-conformance report was “largely redundant in that it need only identify that the Milestone Date had been missed”. DBS also argued that the language of clause 6.1 was insufficiently clear to create a condition precedent.
DBS claimed that clause 5.6 of the Contract was a condition precedent, as it obligated TCS to comply with clauses 5.1 to 5.3 in order to make a claim for any delays which TCS believed had been caused due to a fault of DBS.
Clauses 5.1 – 5.3 essentially obligated TCS to notify DBS of any delays it became aware of as soon as reasonably practicable by submitting an exception report (the details of which were provided within clause 5.3).
The decision
The Court of Appeal dismissed DBS’s appeal, reiterating some of the fundamental principles to be applied when interpreting conditions precedent. The key points to note are as follows:
The court reaffirmed the position set out in Bremer Handels GmbH -v- Vanden-Avenne Izegem PVBA [1978] 2 Lloyd’s Rep 10, noting in particular Lord Wilberforce’s assertion on what determined a condition precedent:
"Whether this clause is a condition precedent or a contractual term of some other character must depend on (i) the form of the clause itself, (ii) the relation of the clause to the contract as a whole, (iii) general considerations of law.”
In support of their judgment, it was determined by the court that “almost any sentence beginning with the word “if” is conditional”, and that “part of the sentence beginning with “then” is not reached until the condition introduced by “if” has been satisfied” which therefore illustrated how the wording of clause 6.1 created a condition precedent.
It was also noted that the absence of a clear time limit in clause 6.1 did not detract from whether the clause could be interpreted as a condition precedent. Nor did the Contract’s silence on the contents of a non-conformance report have any bearing on the conditionality of the clause.
DBS’s failure to provide a non-conformance report was therefore fatal to their significant claim for delay damages under clause 6.2.3.
Commentary
While this was not a “construction case” it is directly relevant to the interpretation of construction contracts. Importantly, the case has provided a straightforward method to assess whether a contract contains a condition precedent, i.e., provisions using ‘if…then’ language.
To illustrate the above, similar principles were considered in the Scottish case of FES Limited -v- HFD Construction Group Limited [2024] CSIH 37. In FES, Lord Richardson commented on the unamended language used within the Standard Building Contract with Quantities at clause 4.20.1, which required compliance with clause 4.21. He stated that,
"the language used in clause 4.20.1 is clear and straight-forward. It indicates that that the contractor's entitlement to reimbursement is ‘subject to ... compliance with clause 4.21”.
The language “subject to” can be compared to the language of “if” and “then” in the DBS case, albeit, whether a condition precedent arises will always depend on the context in which the language is used and the parties’ intent.