LR-301a · Module 1

Conditional Obligation Structures

3 min read

Not every obligation is absolute. Many are conditional — triggered only when a specific event occurs, a threshold is crossed, or a party takes a particular action. Conditional obligations are harder to assess because the risk depends on the probability of the triggering condition, not just the magnitude of the obligation. An uncapped indemnification that triggers only on gross negligence has a different risk profile than the same indemnification that triggers on any breach of the agreement.

Do This

  • Identify every trigger condition for every obligation — "upon breach," "in the event of," "if Party A fails to," "subject to"
  • Assess the probability of each trigger condition separately from the magnitude of the obligation
  • Map conditional chains — obligations that trigger other obligations create cascading exposure

Avoid This

  • Treat conditional obligations as unlikely and therefore low-risk — the trigger condition determines risk, not your optimism
  • Assess the obligation magnitude without considering the trigger probability — an uncapped obligation with a near-impossible trigger is different from one with a probable trigger
  • Ignore cascading conditions — Obligation A triggers Obligation B triggers Obligation C, and the total exposure is the sum, not the maximum