Which of the following conditions in an Agreement of Purchase and Sale would typically be considered a 'condition precedent'?
Correct Answer
C) The buyer obtaining satisfactory financing within 5 business days
A condition precedent is an event that must occur before the parties' obligations under the contract become binding. The financing condition is a classic example - if the buyer cannot obtain satisfactory financing within the specified timeframe, they can withdraw from the contract without penalty.
Why This Is the Correct Answer
Option C represents a classic condition precedent because the buyer's obligation to complete the purchase only becomes binding after they obtain satisfactory financing within the specified timeframe. If financing cannot be secured within 5 business days, the condition fails and the buyer can terminate the contract without penalty. This protects buyers from being forced into purchases they cannot afford, aligning with consumer protection principles embedded in provincial real estate legislation like TRESA in Ontario.
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