A buyer in Metairie signs a purchase agreement to buy a home for $375,000. The agreement includes a due diligence contingency allowing the buyer to cancel within 10 days for any reason. On day 8, the buyer's inspector finds no major issues, but the buyer simply has second thoughts and sends a written notice of cancellation. The seller argues the buyer cannot cancel because the inspection was satisfactory. What is the correct legal outcome under Louisiana contract law?
Correct Answer
B) The buyer can cancel and recover the earnest money because the contingency allowed cancellation for any reason within the stated period
Under Louisiana Civil Code principles, parties are free to contract on any terms not prohibited by law (Civil Code Art. 1971). A due diligence contingency that expressly allows cancellation 'for any reason' within a stated period is a valid potestative condition in the buyer's favor. Because the buyer exercised the right within the 10-day window and the contract expressly permitted cancellation for any reason, the buyer is entitled to cancel and recover the earnest money. The seller cannot override an express contractual right by arguing the inspection results were satisfactory.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Contracts Question
Background Knowledge for Contracts
Real World Application in Contracts
Common Mistakes to Avoid on Contracts Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
More Contracts Questions
A Rhode Island salesperson asks about an owner is about to sign a purchase and sale agreement. What is the best answer?
For the Rhode Island state portion, how should a candidate analyze a seller asks the principal broker about commission split or distribution?
A Rhode Island principal broker reviews a licensee wants to enter a net listing contract. Which answer follows Rhode Island law?
A Rhode Island principal broker reviews a licensee takes a listing agreement. Which answer follows Rhode Island law?
Which Rhode Island rule applies when parties sign a listing, sale, lease, or other real estate contract?
- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
- → In Rhode Island, a licensee submits a written purchase or lease offer to an owner. Which statement is correct?
- → A Rhode Island salesperson asks about a listing agreement or contract for sale is prepared. What is the best answer?
- → Which Rhode Island rule applies when a listing agreement lists property with a multiple listing service?
- → A Rhode Island licensee encounters a listing agreement lets the principal broker retain a portion of deposit money upon buyer default. What should the licensee remember?
- → A Hawaii licensee is reviewing the commission asks to inspect escrow and trust records. What is the best answer?
- → A Hawaii broker asks a salesperson about a deed or lease is not recorded. Which answer follows Hawaii law?
- → For the Hawaii salesperson state portion, interest accrues on a trust-account deposit. Which statement is correct?
- → In a Hawaii real estate transaction, trust funds are placed with a neutral escrow depository for Hawaii property. What should the licensee remember?
- → For the Hawaii salesperson state portion, a licensee secures a party signature on a Hawaii listing or purchase contract. Which statement is correct?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Related Articles
Real Estate Exam Practice Questions by Topic (2026): Free Sets for Contracts, Agency, Financing
Get topic-based real estate exam practice sets and a simple sequence to move from learning to timed mocks.
Real Estate Exam Topics (2026): High-Yield Areas + Common Traps (Contracts, Agency, Financing, Fair Housing)
Learn the highest-frequency real estate exam topics and the traps that cause most wrong answers—plus how to study them.
Real Estate Exam Contracts: The Only Guide You Need (2026) + Practice Questions
Learn the contract rules the exam loves, common trick wording, and how to practice contract questions efficiently.