David is an Indiana Broker who has just drafted a purchase agreement for his buyer client. The agreement includes a financing contingency stating that the buyer must obtain mortgage approval within 21 days or the contract is void. On day 23, the buyer has not obtained financing and has not notified the seller. Which of the following best describes the status of the contract?
Correct Answer
A) The contract remains voidable at the buyer's option because the financing contingency protects only the buyer
A financing contingency in a purchase agreement is primarily for the benefit of the buyer. Under Indiana contract law, when a contingency exists solely for one party's benefit, that party may waive the contingency or declare the contract void. Because the buyer has not yet invoked the contingency or notified the seller, the contract remains voidable at the buyer's option — the buyer can still waive the contingency and proceed or declare the contract void based on the failed condition.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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.
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