A buyer submits an offer with a financing condition that must be satisfied by 5:00 PM on March 15th. On March 14th at 3:00 PM, the buyer's mortgage application is denied. What should the buyer do?

Q: What is the correct answer to: A buyer submits an offer with a financing condition that must be satisfied by 5:00 PM on March 15th. On March 14th at 3:00 PM, the buyer's mortgage application is denied. What should the buyer do?

The correct answer is Immediately notify the seller in writing that the condition cannot be satisfied. Option B is correct because it reflects the principle of good faith dealing required in real estate contracts. When a buyer knows with certainty that a condition cannot be satisfied, they must promptly notify the seller in writing. This allows both parties to terminate the agreement and pursue other opportunities rather than waiting unnecessarily for the deadline. This obligation is supported by common law principles of good faith and fair dealing that govern contractual relationships in Canadian real estate transactions.

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

Real estate purchase agreements contain conditions that must be satisfied by specific deadlines. Common conditions include financing, inspection, and title searches. When a condition cannot be satisfied, the affected party must provide written notice to terminate the contract. This obligation stems from good faith dealing principles in contract law. The duty to act in good faith requires parties to be honest, reasonable, and not deliberately obstruct the other party's performance. Failure to promptly notify when a condition cannot be met may constitute breach of good faith dealing.

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

KNOW = Keep Notifying Other When conditions can't be met. Think of it like calling to cancel dinner plans as soon as you know you can't make it - don't wait until the last minute when everyone is already at the restaurant waiting for you. When you see condition deadline questions, remember KNOW. If the party already knows the condition can't be satisfied, they must immediately notify the other party in writing, not wait for the deadline to expire.

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

Look for scenarios where someone already knows a condition can't be met before the deadline. The answer will always involve immediate written notification to the other party, not waiting for automatic expiry.

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

A buyer gets pre-approved for a mortgage and submits an offer with a financing condition deadline of Friday at 5 PM. On Thursday morning, their lender calls to say the application is denied due to a credit issue discovered during underwriting. Rather than hoping for a miracle or waiting until Friday evening, the buyer's agent immediately drafts a notice to the seller's agent stating the financing condition cannot be satisfied, allowing the seller to immediately re-list the property and consider other offers.

Question

Contracts & AgreementsConditionsMEDIUM

A buyer submits an offer with a financing condition that must be satisfied by 5:00 PM on March 15th. On March 14th at 3:00 PM, the buyer's mortgage application is denied. What should the buyer do?

Answer Options

A

Wait until the condition deadline expires to automatically void the contract

B

Immediately notify the seller in writing that the condition cannot be satisfied

C

Submit a new offer with different financing terms

D

Request a 30-day extension to find alternative financing