A buyer submits a written offer on a Fairfield County property contingent on obtaining mortgage financing within 21 days. The seller accepts the offer. On day 19, the buyer's lender issues a written denial of the loan application. The buyer notifies the seller in writing on day 20 and requests return of the $15,000 earnest money deposit. The seller refuses, claiming the buyer did not make a good faith effort to obtain financing. Under Connecticut law, which of the following best describes the outcome if the contingency language simply states 'subject to buyer obtaining a mortgage commitment within 21 days'?
Correct Answer
B) The buyer is entitled to return of the deposit because the financing contingency was not satisfied and was properly invoked within the deadline
Under Connecticut contract law, a financing contingency protects the buyer's right to exit the contract and recover their earnest money if the specified financing is not obtained within the stated period. When the contingency language does not impose a specific obligation to apply to multiple lenders or take extraordinary steps, a buyer who receives a written loan denial and properly notifies the seller within the contingency period has satisfied the contractual requirements to invoke the contingency. The buyer is entitled to return of the earnest money deposit. The seller's claim of bad faith would require evidence beyond a single denial — the plain language of a standard financing contingency does not impose a multi-lender obligation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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