A buyer's financing condition states 'subject to obtaining financing of $400,000 at 5.5% interest.' The buyer obtains approval for $400,000 at 6.2% interest. What are the buyer's options?

Q: What is the correct answer to: A buyer's financing condition states 'subject to obtaining financing of $400,000 at 5.5% interest.' The buyer obtains approval for $400,000 at 6.2% interest. What are the buyer's options?

The correct answer is The buyer can reject the financing as it doesn't meet the specific condition. Option B is correct because contract conditions must be satisfied according to their precise terms. The financing condition specifies both $400,000 amount AND 5.5% interest rate. Since the buyer only obtained 6.2% financing, the condition remains unfulfilled. Under Canadian contract law and provincial real estate legislation, buyers are not obligated to accept financing that doesn't meet the stated criteria. The buyer can legally reject this financing and either seek alternative financing that meets the condition or withdraw from the agreement without penalty, as the condition has not been satisfied.

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

Contract conditions in Canadian real estate are contingencies that must be satisfied for the agreement to become firm and binding. Common conditions include financing, inspection, and sale of buyer's property. Under provincial legislation like TRESA and RESA, conditions must be fulfilled according to their exact terms - there's no substantial compliance doctrine. Conditions protect buyers by allowing withdrawal if specific requirements aren't met. The condition period is typically specified in the agreement, during which the buyer must either satisfy, waive, or fail to meet the condition. Failure to satisfy conditions allows the buyer to withdraw without penalty and recover their deposit.

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

Remember 'EXACT' - Every eXact condition Absolutely Counts in conTracts. Just like ordering a size 8 shoe and receiving size 9 doesn't work, getting 6.2% interest when you specified 5.5% doesn't satisfy the condition. The contract terms must match exactly, not approximately. When you see condition questions, apply the EXACT rule - ask yourself if the outcome matches the condition precisely. If any element differs from what's specified (amount, rate, timeline, etc.), the condition isn't satisfied and the buyer can withdraw.

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

Look for specific numbers or terms in conditions. If the question shows any variance from the stated condition requirements, the condition isn't satisfied. Don't be fooled by 'close enough' scenarios - contract conditions require exact compliance.

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

A buyer submits an offer on a $500,000 home with a condition 'subject to financing of $400,000 at 5.5% interest within 10 days.' Their mortgage broker secures approval for $400,000 but only at 6.2% due to recent rate increases. Despite having the required loan amount, the buyer can legally withdraw because the interest rate doesn't meet their condition. This protects them from accepting financing that would cost significantly more over the mortgage term. The buyer might then negotiate a price reduction with the seller or seek alternative lenders to meet the original condition terms.

Question

Contracts & AgreementsConditions And WaiversABMEDIUM

A buyer's financing condition states 'subject to obtaining financing of $400,000 at 5.5% interest.' The buyer obtains approval for $400,000 at 6.2% interest. What are the buyer's options?

Answer Options

A

The buyer must accept the higher rate as financing was obtained

B

The buyer can reject the financing as it doesn't meet the specific condition

C

The seller can force completion with the available financing

D

The condition is automatically waived with any approved financing