Susan and Tom are selling their home in Greenwich, Connecticut. They accept an offer from a buyer that includes a mortgage contingency. The contingency states the buyer must apply for a loan within 5 business days and obtain a written commitment within 30 days. The buyer applies on day 3 but never submits required financial documents to the lender, causing the loan to be denied on day 28. The buyer then notifies the seller of intent to terminate the contract under the mortgage contingency. What is the most accurate legal assessment?
Correct Answer
D) The seller may declare the buyer in default because the buyer's failure to cooperate with the lender caused the denial, preventing good-faith satisfaction of the contingency
Connecticut contract law, like general contract law, requires parties to act in good faith to satisfy contingencies. A buyer cannot deliberately or negligently prevent the satisfaction of a contingency and then use that failure as grounds to terminate the contract. Because the buyer's own failure to submit required financial documents caused the loan denial, the buyer cannot claim the benefit of the mortgage contingency protection. The seller may declare the buyer in default and potentially retain the earnest money deposit.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
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