Brian Sandoval’s Deal with Tesla Motors Is a Contractual Condition Precedent

Governor Brian Sandoval announced yesterday that he will be asking the Nevada legislature to approve a deal he struck with Tesla Motors to induce the electric-car company to build its  battery plant in northern Nevada.

If approved, Tesla Motors will build its plant east of Reno and get approximately $1.3 billion in tax breaks. In exchange, Nevada would receive an estimated 6,500 high-paying jobs and up to $10 billion invested in the Nevada economy.

However, because Governor Sandoval must get legislative approval for his deal, the contract with Tesla Motors is not enforceable. In legal terms, there is a condition precedent that must arise before either party has a contractual duty.

A condition precedent is some event built into a contract that must occur before performance is due. No contractual duty arises until the condition precedent is met. In this case, Governor Sandoval and his team of aides undoubtedly put in long hours with representatives of Tesla Motors reaching a mutually beneficial and acceptable agreement. However, because legislative approval was a prerequisite to the deal going through, even if Governor Sandoval and a representative of Tesla had signed on the dotted line, the contract would be unenforceable until the condition precedent—legislative approval—is met.

If the benefits of the deal are as promising as it is reported, this would be a great benefit to Nevada’s economy. For more details on the deal that was struck, read the article linked below.

Nevada’s share of Tesla plant could hit $1.3 billion

 

Zachariah B. Parry is an attorney and founding partner at the law firm Parry & Pfau and is an adjunct professor who teaches torts, contracts, and Nevada practice and procedure for UNLV’s paralegal program. He can be reached at 702-912-4451 or zach@p2lawyers.com.