A buyer submits an offer on an Alberta property with a condition for financing approval within 5 business days. On the 4th day, the buyer decides they no longer want the property but have received financing approval. Can the buyer use the financing condition to exit the contract?

Q: What is the correct answer to: A buyer submits an offer on an Alberta property with a condition for financing approval within 5 business days. On the 4th day, the buyer decides they no longer want the property but have received financing approval. Can the buyer use the financing condition to exit the contract?

The correct answer is No, conditions must be exercised in good faith; if financing is approved, the buyer cannot use this condition to exit the contract. Alberta contract law imposes an implied duty of good faith in exercising conditions. If a financing condition has been satisfied (approval received), the buyer cannot pretend it was not satisfied to exit the contract for unrelated reasons. Using a satisfied condition as a false pretext to terminate violates the duty of good faith.

Q: What background knowledge is needed for this Contracts & Agreements question?

Canadian courts, including Alberta courts, have established that contracting parties owe each other a duty of good faith. The Supreme Court of Canada in Bhasin v. Hrynew confirmed this organizing principle. For conditions with objective criteria like financing, this means parties must act honestly when the condition is clearly met.

Q: What is a good way to remember the answer to this Contracts & Agreements question?

Think of good faith as playing fair. If your financing is approved, you cannot fake a rejection to escape the deal. Conditions are shields, not swords. On the exam, distinguish between sole discretion conditions (subjective, broad rights) and objective conditions like financing (must act in good faith when satisfied).

Q: What exam tip applies to this Contracts & Agreements question?

Financing conditions are objective. If approved, the buyer must waive. Compare this with sole discretion conditions where the buyer has broad subjective rights.

Q: How does this Contracts & Agreements concept apply in real world practice?

A buyer receives mortgage approval on day 3 of a 5-day financing condition but decides they prefer a different neighborhood. Their agent advises that claiming the financing was not approved would violate good faith. The buyer must either waive the condition or find a legitimate legal basis to exit.

Question

Contracts & AgreementsABMEDIUM

A buyer submits an offer on an Alberta property with a condition for financing approval within 5 business days. On the 4th day, the buyer decides they no longer want the property but have received financing approval. Can the buyer use the financing condition to exit the contract?

Answer Options

A

Yes, the buyer can refuse to waive any condition for any reason

B

No, conditions must be exercised in good faith; if financing is approved, the buyer cannot use this condition to exit the contract

C

Yes, all conditions are entirely at the buyer's discretion

D

No, but the buyer may simply let the condition expire without consequences