Agreement subject to the plan: Overview, definition, and example
What is an agreement subject to the plan?
An "agreement subject to the plan" refers to a contract or agreement that is contingent upon the completion or approval of a specified plan. In other words, the terms of the agreement will only be fully executed or become binding once the plan—whether it’s a business strategy, project proposal, or other outlined plan—is finalized, approved, or carried out. This kind of agreement ensures that the parties involved only proceed once the conditions laid out in the plan are met.
For example, a company might enter into an agreement to purchase a property, but the sale would only go through once a development plan for the property is approved by the local authorities.
Why is an agreement subject to the plan important?
An agreement subject to the plan is important because it provides flexibility and protection for the parties involved. It ensures that certain conditions must be met before the full obligations of the agreement are triggered. This type of clause helps reduce risk for one or both parties, particularly in situations where approval, feasibility, or planning is uncertain.
For businesses, this arrangement allows for conditional agreements, meaning that commitments can be made with the understanding that they are not fully enforceable until the relevant plan or conditions are in place. This helps prevent proceeding with a deal that may later prove unfeasible or undesirable.
Understanding agreement subject to the plan through an example
Imagine a company enters into an agreement with a construction firm to build a new office. However, the contract states that the construction work is subject to the approval of a city zoning plan. If the city does not approve the zoning plan, the construction agreement would be voided. This ensures that the company isn’t forced to proceed with the construction if the plan doesn’t get the necessary approval.
In another scenario, a business might sign a partnership agreement, but the agreement is subject to the successful completion of a market research plan. If the research shows that the market is not viable, the business is not obligated to move forward with the partnership.
Example of an agreement subject to the plan clause
Here’s how an agreement subject to the plan clause might appear in a contract:
“This Agreement is subject to the approval and completion of the Plan outlined in Schedule A. The Parties agree that all terms of this Agreement shall become effective only upon the successful completion and acceptance of the Plan by both Parties.”
Conclusion
An agreement subject to the plan provides a clear way to make deals contingent on certain conditions, such as the approval or completion of a specific plan. It helps protect both parties by ensuring that their obligations are only triggered once all necessary steps or approvals are in place.
For business owners and managers, understanding this concept allows you to enter into agreements with the assurance that you won’t be fully committed unless the agreed-upon plan is realized. This flexibility helps manage risks and ensures that you’re not locked into unfavorable deals when key conditions are uncertain or pending.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.