In a complex transaction, a buyer's solicitor discovers a restrictive covenant that significantly impacts the intended use of the property. The Agreement of Purchase and Sale contains no specific condition regarding restrictive covenants, but includes a standard 'good and marketable title' clause. Can the buyer terminate the agreement?

Option A: No, because there was no specific condition regarding restrictive covenants

Option A incorrectly assumes that the absence of a specific condition regarding restrictive covenants prevents the buyer from terminating. The 'good and marketable title' clause provides broader protection than specific conditions and covers material encumbrances that affect marketability, including restrictive covenants that significantly impact the property's use.

Option C: No, because restrictive covenants are always considered acceptable encumbrances

Option C is incorrect because restrictive covenants are not automatically considered acceptable encumbrances. While some minor restrictions may be acceptable, those that materially affect the property's marketability or the buyer's intended use can breach the good and marketable title requirement and provide grounds for termination.

Option D: Yes, but only if the buyer can prove the seller knew about the covenant

Option D incorrectly suggests that the seller's knowledge of the covenant is required for the buyer to terminate. The marketable title obligation is objective - if a restrictive covenant materially affects marketability, the buyer can terminate regardless of whether the seller knew about it. The seller's knowledge may affect damages but not the right to terminate.