Sophia is a Louisiana real estate salesperson. Her client, Paul, is purchasing a home from a seller who is represented by another agent. Paul's purchase agreement contains a clause stating that if the seller fails to deliver the property free of all mortgages and liens at closing, Paul may demand dissolution of the contract. What type of contractual condition is this clause?
Correct Answer
D) A resolutory condition, because it dissolves the contract upon the occurrence of a specified event
Under Louisiana Civil Code Art. 1767, a resolutory condition is one that dissolves an already-existing obligation upon the occurrence of a future, uncertain event. The clause described — allowing Paul to demand dissolution if the seller fails to deliver clear title — operates as a resolutory condition: the contract is in force, but if the specified event (failure to deliver clear title) occurs, Paul has the right to dissolve it. The obligation exists and is effective until the condition is triggered.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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